THEORY

This paper makes three main contributions to the literature on resource curse and violent civil conflicts. First, we build upon Bodea and Elbadawi (2007) and model the hazard of armed civil conflict as a manifestation of the natural resource curse, along with other standard correlates analyzed in the literature. Second, unlike most models of armed civil conflict occurrence, ours explicitly accounts for the role of good economic and political institutions in deterring the recourse to violence as well as the extent to which they might weaken the resource rents effect. Third, we use recent World Bank data on natural resource rents to measure the potential impact of the resource curse on armed civil conflicts. Save for a few exceptions,1 the empirical resource curse literature has, by and large, relied on qualitative indicators of natural resource dependency, which do not convey as much information as our quantitative resource rents measure. Our empirical results corroborate the predictions of the theoretical model. First, we find a

robust and positive association between resource rents per capita and the occurrence of an armed civil conflict. Second, good economic and political institutions do reduce the hazard of conflict. Third, moreover, strong political institutions for checks and balances appear to weaken the impact of resource rents on conflicts. Our emphasis on institutions bodes well with the emerging consensus in the empirical

growth literature which suggests that, while the resource curse does exist, it is not destiny but the result of bad economic and political governance (e.g. Collier and Goderis, 2009; Elbadawi and Soto, 2012). The high premium placed on the role of institutions in resourcedependent societies is premised on the fact that making resource rents work for development is particularly arduous due to, first, the nature of these rents and, second, the need for strong economic and political institutions for their successful management. Resource rents are intrinsically temporary when they are derived from non-renewable, depletable stocks (e.g. oil, gas, and minerals). Their returns are also unreliable because prices of oil and other minerals are highly volatile and adequate risk coverage is not always available. Moreover, unless such institutions are already in place, their development is likely to be impaired by the corrosive effects of natural resource dependency.2