Natural resources and sub-national economic performance: Does sub-national democracy matter?

The differentiation in the impact of resources on economic growth is often explained by the specifics of institutional factors. The aim of this paper is to investigate how sub-national political differences influence the effect of natural resources on economic growth. Using a dataset of Russian regions, this paper demonstrates that sub-national democratization influences the growth effects of resources and considers possible mechanisms for this influence. The paper finds that in Russia, natural resources are only capable of promoting growth in the regions with non-democratic political systems that, at the same time, have an efficient and non-corrupt bureaucracy.

► Subnational variation of institutions matters for how resources affect growth ► In Russia oil and gas encourage growth only in non-democratic regions ► Significant effect only for non-democracies with high quality of bureaucracy ► Effect is also present for a number of further development indicators