Institutions and Decision Making for Sustainable Development (original) (raw)

Natural Resources, Institutional Quality and Sustainable Development: Simultaneous Analysis of the Main Transmission Channels

Natural Resources, Institutional Quality and Sustainable Development: Simultaneous Analysis of the Main Transmission Channels, 2022

The sustainable development of resource-rich countries reveals a counter-intuitive phenomenon: their natural wealth is a blessing for some and often turns into a curse for others. The objective of this paper is to show that the curse of natural resources has been elucidated through political economy; resource revenues have devastating effects on political and economic modes of governance. Via rent-seeking behaviors by political elites, natural rent has often generated extreme cases of institutional collapse. The study includes 70 countries and data that characterize them, over a period from 1980 to 2021, and via a simultaneous equation model, we seek to study the trilateral relationship and the interaction links between natural resources, institutional quality and sustainable development. The empirical results show that most of the countries with natural wealth are classified as countries with low human development levels, with a HDI between 0.207 and 0.314, these countries are finally victims of the curse of natural resources, a curse particularly due to a worsening of the institutions in force. However, the developed countries, despite the precariousness of their natural resources, they have exploited this endowment in the strengthening of their economies, while recording good indicators of human and social development, this has been achieved through a great transparency and better management of natural resources, hence a good institutional quality that acts positively on the rents generated by resources.

The level of institutional capital and challenges in sustainable development

: In this article, the importance of property rights and transaction costs for sustainable development will be elaborated, and the notion of institutional capital, creating society's capacity and capability to enter a path of sustainable development, will be developed. Possible consequences of a lack of institutional capital and, in particular, different levels of institutional capital in different areas will be discussed on the example of the Baltic region. Based on literature study, a theoretical framework is developed for analysing the influence of different types of property rights and transaction costs, as well as different levels of institutional capital (embracing value in the public domain, institutional strength, good governance, objective science and an institutional equilibrium), on sustainable development. A low level of institutional capital (expressed by poorly delineated and / or enforced property rights, high transaction costs of policy making, lack of good governance, weak institutions and / or an institutional disequilibrium) or different levels of institutional capital in different countries creates the threat of entering or continuing unsustainable development paths. Different levels of institutional capital in different countries may lead to a situation where countries with a higher level of institutional capital try to push through their developmental aims. When on a transnational level there is a low level of institutional capital, this may lead to policy focus on economic and environmental interests, neglecting social issues. Keywords: Sustainable development, institutional capital, good governance, property rights, transaction costs, Baltic Region