The Psychology of Mineral Wealth: Empirical Evidence from Kazakhstan

TL;DR

This study investigates how social psychology influences resource mismanagement in Kazakhstan, revealing that media exposure fosters inflated expectations and preferences for immediate consumption, contributing to the resource curse.

Contribution

First empirical analysis linking psychological factors to resource mismanagement in mineral-rich countries using extensive survey data from Kazakhstan.

Findings

Media exposure increases expectations of mineral wealth

Inflated expectations lead to preferences for immediate consumption

Psychological factors contribute to rent-seeking behavior

Abstract

Despite rapidly-expanding academic and policy interest in the links between natural resource wealth and development failures (commonly referred to as the resource curse) little attention has been devoted to the psychology behind the phenomenon. Rent-seeking and excessive reliance on mineral revenues can be attributed largely to social psychology. Mineral booms (whether due to the discovery of mineral reserves or to the drastic rise in commodity prices) start as positive income shocks that can subsequently evolve into influential and expectation-changing public and media narratives; these lead consecutively to unrealistic demands that favor immediate consumption of accrued mineral revenues and to the postponement of productive investment. To our knowledge, this paper is the first empirical analysis that tests hypotheses regarding the psychological underpinnings of resource mismanagement in mineral-rich states. Our study relies on an extensive personal survey (of 1977 respondents) carried out in Almaty, Kazakhstan, between May and August 2018. We find empirical support for a positive link between exposure to news and inflated expectations regarding mineral availability, as well as evidence that the latter can generate preferences for excessive consumption, and hence, rent-seeking.