The Analysis of Political Institutions’ Effect on the Economic Institutions in Resource-rich Countries

The weak economic performance of resource-rich countries results in the economic studies’ great concentration on the role of institutions in resource curse literature and employment of theoretical or empirical approaches to determine the cause of this phenomenon . In this paper, we argue that the two independent variables of political institutions and natural resources influence the economic institutions which are endogenous variables; by applying a descriptive-analytical approach and making distinction between function of “economic institutions” and “political institutions” . Political institutions form the political power structure to specify the elites’ scope of power in the establishment of favorable economic institutions, which aim at distributing the resources among the affiliated groups . We also use the empirical approach to show that natural resources do not have any significant effect on the quality of economic institutions by controlling the effect of political institutions . In contrast, the better quality of political institutions results in the better quality of economic institutions .