Democratic Institutions, Natural Resources, and Income Inequality

Governance in mitigating the effect of oil wealth on wealth inequality: A cross-country analysis of policy thresholds

“…Similar results are also found in Table 8, except that the coefficient on the interaction variable between oil rent and corruption control is now insignificant. These results are like those of Hartwell et al (2019), who found that democracy mitigates the positive effect of natural resource rents on income inequality. In sum, these last results confirm our second hypothesis concerning the moderating role of governance in mitigating the positive effects of oil rent on wealth inequalities.…”

Who Profits from Windfalls in Oil Tax Revenue? Inequality, Protests, and the Role of Corruption

“…This finding is related to our hypothesis that the likelihood of rent-capture affects how oil windfalls are distributed since ethnic polarization has been linked to rent-seeking (e.g., Dincer, 2008). Hartwell et al (2019) use the World Bank measure of natural resource rents and cross-country data to show that the impact of these rents on inequality is conditional on the level of democracy: natural resource rents in more (less) democratic countries result in lower (higher) inequality. 7 Most studies mentioned above employ a very broad measure of natural resources that include minerals, hydrocarbon fuels, land 7 Although Hartwell et al's argument is reminiscent of ours, their econometric approach is very different.…”

Sharing Resource Wealth Inclusively Within and Across Generations

“…Eicher and Turnovsky (2003) documents a positive association, albeit weak, between the share of natural resource wealth in total wealth, and Gini market income inequality. Hartwell et al (2019) finds evidence of a positive correlation between the lags of resource rents and market income inequality among countries with low levels of democracy, and a negative correlation among countries with relatively high levels of democracy.6 F 7 Lessmann and Steinkraus (2019) provides evidence of a strong and positive association between spatial inequality in the distribution of resource wealth and intergroup market income inequality. Economists have proposed different theories to explain this surprising and often unintuitive relationship between resource wealth and inequality.…”

“…To explain the nexus between resource dependence, the level of democracy, and inequality, Hartwell et al (2019) proposes that the influence of democracy operates through three distinct channels affecting equity. First, democracies allow a broader number of checks and balances, thus preventing the concentration of power over the control of resource rents into the hands of a few economic and political players.…”