Our goal is to show that contrary to the claims made in several recent papers, the effect of a large endowment of oil and other mineral resources on long-term economic growth of countries has been on balance positive. Moreover, the claims of a negative effect of oil and mineral wealth on the countries' institutions are called into question. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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We analyze the relationship between product market competition and corruption. The existing theoretical literature produces ambiguous implications for the sign of this relationship, making it an empirical issue. Unlike the existing empirical studies that use cross-country data, we test the relationship between competition and corruption using firm-level information. This approach overcomes serious estimation difficulties that result from relying on cross-country data. Contrary to the existing work, we show that greater product market competition is typically associated with greater corruption.

This note argues that the most commonly used estimates of the size of the unofficial economies in the former Soviet republics are flawed. Most important, they are based on calculations that disregard the variation in unofficial economic activity across space in the pre-transition Soviet Union. In addition, these estimates appear to understate the size of the unofficial economies in these countries. We propose alternative estimates and find that they are more strongly related to the institutional factors commonly used to explain the size of the unofficial sector. Our estimates also show that the size of a country's pre-transition unofficial economy is an important predictor of its size during the transition. This suggests that the size of the unofficial economy is to a large extent a historical phenomenon only partly determined by contemporary institutional factors.JEL classification: O17, P2, P3.

Using crosscountry regressions, we examine the relationship between "point-source" resource abundance and economic growth, quality of institutions, investment in human and physical capital, and social welfare (life expectancy and infant mortality). Contrary to most literature, we find little evidence of natural resource curse outside of the economies in transition. In the economies in transition, there is some evidence that natural resource wealth is associated with higher infant mortality. This negative effect, however, exists only relative to other resource rich countries. Compared to other economies in transition, natural resource abundant transitional economies are not worse off with respect to our indicators.

The paper considers the Russian privatization process and examines how its deviation from the competitive sale standard was likely to affect wealth inequality. (Privatization here is defined narrowly as the transfer of existing assets from government ownership to private hands.) While empirical evaluation is all but impossible due to the dearth of reliable data, it is feasible to analyze the institutional features of Russian privatization in terms of their effect on redistribution of wealth. The paper argues that the most relevant and interesting issue is to evaluate privatization's distributional consequences relative to the informal pre-reform property rights. In light of this, privatization is modelled as a rent-seeking contest with incumbency advantage of enterprise managers who initially held the greatest informal rights over assets. The rent-seeking contest is shown to strongly magnify this pre-reform wealth inequality reflected in the incumbency advantage.In addition, the paper analyzes the distributional consequences for various wealth groups of the differences in the composition of their pre-reform informal wealth, most importantly a relatively large share of housing assets in the wealth of the poor. The effect of wealth redistribution on economic growth in Russia is also discussed.JEL classification: D7, P2, P3.

We model the taxation behavior of a revenue maximizing government in the presence of tax evasion by firms and the existence of a competing tax collector, in this case organized crime (or the "mafia"). In order to evade taxes, the firm must shift some of its sales underground, incurring convex costs. We show that the government's optimal tax rate and revenue in equilibrium are higher when the mafia is present. Furthermore, we assume that the mafia has limited ability to tax the firm's share of above ground activities. Our analysis shows that under certain assumptions, an increase in this ability does not affect the government's tax rate and revenue.

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