The effect of natural resources rents on institutional and policy reform: New evidence

Using cross-section, panel, and probit models for a panel of 112 countries over the 2005–2018 period, we examine the effect of natural resource rents on institutional and policy reform, proxied by the change in economic freedom measures. Our results suggest that natural resource rents have a negative and significant effect on the change in economic freedom. This finding is confirmed when we use the share of natural resources in exports as an alternative proxy for resource abundance. Distinguishing among different types of natural resources, we find that notably oil rents have a significant negative effect on changes in economic freedom.