Imperial Origins of the Oil Curse

Abstract The literature maintains that oil creates a curse on development in countries with weak national institutions at oil discovery, but offers little guidance on the specific institutions that help leaders avoid the curse. We trace rent distribution in Kuwait and Oman, apparent outliers that experienced development despite their weak national institutions at oil discovery. Unlike other examples of the oil curse, Kuwait and Oman contained a strong informal institution that compelled rulers to spend oil revenues on human development: a balance of power between leaders and their domestic rivals. Because informal balances of power are also present in countries with strong formal institutions that avoid the oil curse, this article suggests that the presence or absence of informal balances of power may help account for whether oil is a blessing or a curse.