The Political Logic of Renter’s Insurance : The Resource Curse, Institutional Strength, and Resource Stabilization Funds in Chile and Venezuela

Which exact institutions constrain the resource curse and when are they successful? The resource curse literature's recent institutional turn does not provide convincing answers. This article focuses on specific institutions - resource stabilization funds (RSFs) - that, when successful, help alleviate the resource curse. However, the most prominent argument for institutional success, political insurance, cannot explain the development of strong RFS that curb executive discretion and thus ameliorate the resource curse. I present an alternative logic for institutional strength - termed developmental investment - whereby incumbents create RSFs to rectify problems accompanying resource-dependence. Under developmental investment, incentives to disregard RSF rules and plunder resource revenues are minimized, but only because these restrictions politically benefit executives. Corroborated by evidence from Chile and Venezuela, my argument explains how institutional strength develops