The goal of the paper is to build on a theory that argues that good institutions remedy the resource curse. Advances are made by: (a) using a panel of up to 53 countries over the period 1984-2003; (b) applying a Generalised Method of Moments (GMM) estimation that accounts for biases associated with omitted variables, endogeneity and unobserved heterogeneity and (c) using an institutional quality measure that is more related to financial than just political institutions. The key hypothesis that good financial institutions may remedy the resource curse is confirmed by the empirical results of the paper.

Keywords: World economy, resource curse, financial institutions

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