THE POLITICAL ECONOMY OF PETROLEUM WEALTH: SOME POLICY ALTERNATIVES

Mineral wealth tends to make countries less democratic and more likely to experience a civil war. Many countries also find it hard to use their natural resource revenues to make high-quality, growth-enhancing investments. I argue that these problems are caused, in part, by the unusual qualities of resource revenues — their great size, their non-tax source, their lack of stability, and their secrecy. While there is no universal formula for changing these four qualities, I present a menu of policies that could make natural resource revenues smaller, smoother and more transparent, and hence easier for governments to invest productively.