Economics serving society

Oil, Governance and the (Mis) Allocation of Talent in Developing Countries

Christian Ebeke, Luc Désiré Omgba and Rachid Laajaj

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The “curse” of natural resources refers to a paradox observed since the 1990s: countries rich in natural resources have an average growth rate lower than those that are not. Ebeke, Omgba and Laajaj offer new ways to understand this apparent paradox through observing the role of oil resources in the specialisation choices of tertiary students. Human capital is a crucial factor in economic development, but the most qualified people should still dedicate themselves to the most productive activities rather than to rent-seeking.
In this article, the authors show that in countries that have “good” institutions to start with (e.g., a rule of law, low levels of corruption), an increase in oil rents tends to increase the proportion of university students opting for careers as engineers. In contrast, when such institutions are fragile, an increase in oil rents increases the proportion of students who opt for careers that offer better access to public rents, such as the professions of jurists, managers and economists. In a way, the rent increases the size of the cake and fragile institutions allows certain professions to monopolise the largest part of the cake. Even if the country needs jurists, managers and economists, problems arise when these professions are overrepresented relative to others. They tend to facilitate privileged access to public rents, either in illegal fashion through corruption, or in legal fashion through the growth in salaries arising from the growth of resources. These results suggest that the governments of countries rich in oil must pay particular attention to the specialisations of university students and their future orientations. The country should ensure that a reasonable proportion of students take up the courses that lead to engineering careers and specialisations that contribute to growth but do not offer easy access to public rents. In the short term, this objective can be attained through the creation of stipends, potentially funded by oil revenues, of which a significant part should be allocated to the training of engineers and associated professions. In the long term, governments must increase transparency in the use of revenues linked to oil production in order to control their use by those professions having direct access to such rents.
Original title of the article : “Oil, Governance and the (Mis) Allocation of Talent in Developing Countries”
Published in: Journal of Development Economics, Volume 114, May 2015, Pages 126–141
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