Raiding the honey pot: The resource curse and weak institutions at the project level

In the macroeconomics and political science literature, the natural resource curse hypothesis conditionally connects national dependence on natural resource revenues to both slow economic growth in the non-resource sectors and a lower quality of democratic institutions. Anthropologically oriented research on the cultures and communities where resources extraction occurs has documented a wider range of problems. This paper derives local-level predictions from the macro-level literature and checks their accuracy in the case of a gold mine on a Melanesian island in Papua New Guinea. Predictions of corruption and rent seeking were confirmed, but contrary to some conditional predictions, the local democratic institutions appeared to strengthen. The mining company's policies temporarily restrained rent seeking and corruption but both returned as closure neared and the company reduced its presence. The findings largely support the insight from anthropological research that local communities take an active role in both resisting and promoting resource curse dynamics. Noting several recommended curse-reducing measures at the national level, the discussion articulates gaps in our knowledge about how resource extraction companies can restrain the curse locally.