When does resource wealth stabilize fragile states? The moderating role of the rule of law in conflict-affected economies

Purpose This study aims to examine whether natural resource rents are associated with greater or lower political stability in fragile and conflict-affected economies, and tests the rule of law as the institutional condition that conditions this association. The aim is to clarify when resource wealth becomes a source of stability rather than conflict. Design/methodology/approach The sample draws on 45 economies from the World Bank Fragile and Conflict-Affected Situations list over 2008–2023, forming an unbalanced panel whose estimation sample reduces to 32 countries after listwise deletion. Fixed-effects regression with Driscoll-Kraay standard errors addresses cross-sectional dependence, and a specification with a lagged dependent variable captures the persistence of political stability. Marginal associations across the observed institutional range, together with the rule-of-law value at which the sign of the rents association reverses, are reported alongside the interaction estimate. Findings Resource rents alone show no significant association with political stability, whereas the rule of law shows a strong direct association and a positive interaction with resource rents. The marginal association between rents and stability is negative across most of the observed institutional range. It turns positive only above a rule-of-law score of about −0.48, which lies roughly 0.85 standard deviations above the sample mean, so the stabilizing configuration applies to a minority of the fragile economies studied. Political stability also displays marked persistence over time. Originality/value The study refines the institutional resource-curse literature by showing that the rule of law is the binding condition under which resource rents support stability in fragile states. Circular diplomacy is retained as a forward-looking governance agenda whose feasibility rests on the legal conditions identified here, not as a mechanism tested in the present design.