Resource Curse, Institutions and Non-Resource Sector

This note presents a simple model of how resource rents can affect economic growth of a region of a centralized country, where sub-national governments have no authority over resource industries. The growth effect of resources appears to be conditional on the quality of institutions in the non-resource sector. Thus, even if the sub-national government does not affect the resource sector directly, the quality of institutions set by this government still influences whether resource boom has a positive or a negative effect on the economic growth.