I compare political institutions and decision-making processes in Chile and Bolivia using natural resource sectors as examples.
To determine whether resource extraction contributes to development I first look at institutional set-ups, for example executive dominance, clientelism and inequalities. This is linked to governance quality which in turn determines decision-making. To analyse decision-making processes I apply an organisational theory perspective by looking at so called organisational pathologies such as cognitive biases, principal-agent dilemmas and path dependencies. Economic policies depend on avoiding organisational pathologies which is facilitated by governance quality hence completing a causal process that explains successful economic policies in resource-abundant countries. The results demonstrate that Chilean institutions are better equipped to avoid pathologies in decision-making so that resource extraction offers more promising long-term prospects for human development than in Bolivia where pathologies persist. These findings can also inform further debates on political systems in Latin America and resource management worldwide.
