An empirical analysis of the association between natural resource rents and corruption

Abstract

Introduction In addition to many government failures that many countries have experienced, corruption has been classified as one of the most significant public sector problems. Corruption causes problems in using resources effectively, which is very important in order to reach full level of employment for economies. In this regard, as we will state in the next section, the determinants of corruption have attracted growing attention in both theoretical and empirical researches due to its potential negative externalities for economies. Rent-seeking activities and thus corrupt behaviors find more rooms to arise in countries possessing ample natural resource rents. However, there are few papers in the corruption literature that examine the links between rent-seeking and the level of corruption. Empirically, some papers have revealed the close relationship between rents and corruption (Arezki and Brückner, 2011; Gnimassoun and Keneck, 2015). Theoretically, there is a negative association between competition level and rent-seeking activity, which means that a decrease in the competition level is accompanied by a higher level of rent-seeking activity. Higher rent-seeking activity results in higher level of corrupted behavior by government officials. In this regard, if a firm, which is under the influence of a bureaucrat, has rents, bureaucrat’s motivation for malfeasant behavior such as bribe will be higher. By the same token, an increase in rents will lead to an increase in the corrupt activities (Ades and Di Tella, 1999: 983). Looking at the literature for rent-seeking, it seems that there are various types…. © Peter Lang GmbH Internationaler Verlag der Wissenschaften Berlin 2019.