Institutional quality as a determinant factor of natural resource-based economic development

Institutional quality is critical in explaining differences in economic development between countries rich in natural resources. Yet, beyond the importance attributed to institutions, the existing literature neither clarifies the way in which institutional quality influences natural resources, nor offers clear prescriptions in relation to the type of institutions that are necessary in order to foster development based on a sustainable use of natural resources. This document presents a systematic review of the literature on the importance of institutional quality in the effects of non-renewable natural resources on economic development. The role of institutions is critically reviewed, trying to clarify what the academic literature has revealed in relation to which, how and where institutions matter. This review shows that the way in which institutions matter is complex, diverse and more diffuse than previously thought. Another contribution of this paper is to point out some challenges for future research in order to make better use of natural resources through institutional enhancement, particularly in developing countries.