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Natural resources, corruption and trust: A complex relationship

Kolstad, Ivar; Wiig, Arne
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Natural resources, corruption and trust: A complex relationship (1.220Mb)
URI
http://hdl.handle.net/11250/2474915
Date
2011-12-13
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Original version
Bergen: Chr. Michelsen Institute (U4 Issue 2011:14) 25 p.  
Abstract
Do natural resources reduce social trust? And if so, do natural resources have a direct effect on trust, or is their effect indirect through variables such as corruption? This issue paper reviews the literature on natural resources and on trust. The existing theoretical and empirical literature suggests that natural resources can reduce trust through several indirect mechanisms. Notably, studies show that natural resources lead to institutional degradation, corruption, inequality, and civil war, all of which have been associated with reduced trust. The paper tests empirically whether there is a direct effect of natural resources on trust (The Pearl Hypothesis), using cross-country data. The results indicate that no such direct effect exists, suggesting that any effect of resources on trust runs through intermediate variables such as institutions, corruption, inequality, and civil war. Importantly, however, the relationship between corruption and trust turns out to be non-linear, indicating that the effect of natural resources on trust depends on the initial corruption level of a country.
Publisher
Chr. Michelsen Institute
Series
U4 Issue 2011:14

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