Political economy and governance

This paper reviews the political economy of extractive resources and the associated resources sector governance agenda. The consensus that good sector governance improves the developmental impacts of extractive resources exploitation is premised on the understanding that institutions matter for development. However, there is no straightforward answer to the question of what exactly 'institutions' are, how they change, or how they can be made to change to become more supportive of an extractives-led development agenda. The paper suggests reframing the political economy of extractive resources away from the negative question how can poor outcomes be prevented? and towards the positive question how can positive institutional change for better outcomes be brought about? It organizes and presents the main strands of a substantial body of literature that can help to inform answers to these questions.