Abstract:
This study revisits the conditionality of the natural resource curse using
ethnic polarization as the center of analysis. It argues that the resource curse
is triggered in ethnically polarized societies when productive resources are
reallocated toward rent-seeking activities. The study builds a theoretical
model in a general equilibrium setting to explain how the elite expropriate
natural resource rents in the economy. The elite decision problem
comprises (i) the decision to become an elite actor through a marginal
benefit–cost analysis, followed by (ii) a decision concerning the optimal
level of rent. The results show how ethnically polarized societies become
trapped in a high-corruption equilibrium when the returns from rent
seeking are raised. Conversely, in ethnically homogenous societies, a low
equilibrium acts as a conduit for a lower concentration of political power.
