Resource Curse, Oil Rent and Mismanagement: The Case of PDVSA

In many extractive economies natural resource has the potential to be detrimental to development through the disabling of the countries’ economies, and could be an incentive for mismanagement compared to countries without substantial natural resources (Holden 870). This phenomenon is known as the resource curse (Badeeb et al. 123). This study is a critical assessment of the resource curse theory with regards to the management of Venezuela’s state-owned oil company (PDVSA). It investigates the arguments of the resource curse theory that the resource abundance curses institutions through poor governance and promotes high government spending and corruption (Tornell and Lane 34). To achieve the aim of the research, this study reviews the rent-seeking model and the institutional model of the resource curse theory, and examines their applications to Venezuela’s state-owned company. Since the resource curse theory does not give sufficient explanation hence, institutionalism as a different...Show moreIn many extractive economies natural resource has the potential to be detrimental to development through the disabling of the countries’ economies, and could be an incentive for mismanagement compared to countries without substantial natural resources (Holden 870). This phenomenon is known as the resource curse (Badeeb et al. 123). This study is a critical assessment of the resource curse theory with regards to the management of Venezuela’s state-owned oil company (PDVSA). It investigates the arguments of the resource curse theory that the resource abundance curses institutions through poor governance and promotes high government spending and corruption (Tornell and Lane 34). To achieve the aim of the research, this study reviews the rent-seeking model and the institutional model of the resource curse theory, and examines their applications to Venezuela’s state-owned company. Since the resource curse theory does not give sufficient explanation hence, institutionalism as a different school of thought has been used to complement the theory. The empirical findings and discussion indicates evidence of the rent-seeking model and institutional model in addition to the rationality of institutionalism. This in other words means that the resource curse theory cannot entirely explain the case of Venezuela’s state-owned oil company, PDVSA.Show less

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Resource Curse, Oil Rent and Mismanagement: The Case of PDVSA