When does natural resource abundance lead to a resource curse. They found that dependence on natural resources was connected to low levels of economic growth. Natural resource abundance in a country has an adverse effect on its growth for a variety of reasons. Yet countries that are abundantly endowed with such natural resources often encounter pitfalls that interfere with the expected superior economic performance. Early research focused on macroeconomic dimensions of the curse. Pdf the resource curse revisited research paper roya.
Apr 30, 2012 natural resource revenues have also been linked to slow economic growth rates, inequality, and poverty. The final political aspect of the natural resource curse is the ability of such resources to create and perpetuate conflicts within developing nations. There is no clear evidence from the regressions in table 1, table 2 that there was an omitted variable in our previous growth regressions that can account for the curse of natural resources. Are natural resources a blessing or a curse for developing countries. Mechanisms of the natural resource curse in general, natural resourcerich countries have experienced lower economic growth than natural resourcepoor countries. The curse of natural resources a developmental analysis. The third debate is over whether the resource curse is real or illusory.
It is an expression of the universal law of sowing and reaping. History clearly shows that natural resource wealth may harm economic performance and make citizens worse off. Rebel and separatist groups fighting to control a certain resource or resource rich area. Although most studies report evidence of some type of resource curse, a signi. The natural resource curse hypothesis maintains that rather than fuelling growth and development, natural resource wealth can become the cause of economic stagnation, corruption, and civil war. Article pdf available in journal of economic literature 492. The results of the baseline regression specification summarized in table 3 highlight the existence of a resource curse effect on public education spending. The empirical evidence suggests either outcome is possible. The main point for our purpose is simply to establish that the geography variables generally do not eliminate the evidence for the curse of natural resources. The big idea behind the resource curse is that mineral and fuel abundance in less developed countries ldcs tends to generate negative developmental outcomes, including poor economic performance, growth collapses, high levels of corruption, ineffective governance and greater political violence. Combating the natural resource curse with citizen revenue. Economic growth, institutions, and the natural resource. Our findings suggest that a pointsource type natural resource endowment does retard democratic and. The natural resource curse and possible channels a.
There are many theories and much academic debate about the reasons for, and exceptions to. There are gains and losses from finding a natural resource. Natural resources, for most poor countries, are deemed to be more of a curse. Natural resource intensive economies have had smaller contributions from exports of. The oil curse how petroleum wealth shapes the development of nations.
Testing of natural resources as blessing or curse to the. Pdf on apr 1, 2016, ramez badeeb and others published the evolution of the natural resource curse thesis. The results indicate that natural resources do not adversely affect economic growth directly in the large sample of 170 countries for the period 1991 to 2011. Meeting the challenge of the resource curse international experiences in managing the risks and realising the opportunities of nonrenewable natural resource revenue management prepared for bureau for resources and strategic partnerships united nations development programme january 2006 programme on business and development performance. This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. This is often, and most obviously manifested in, the form of civil wars.
Two years later, the economists jeffrey sachs and andrew warner initiated the big statistical literature on the subject. The resource curse thesis suggests that countries with a high dependence on natural resources suffer from negative macroeconomic and macropolitical effects. Combating the natural resource curse with citizen revenue distr. Case studies from southern africa 7 preface background to the power relations study this report consists of a series of individual country papers prepared for a study on devolution, community empowerment and power relations in communitybased natural resource management cbnrm during 1999. Naturalresourcesandeconomicdevelopment thecurseofnaturalresources. If large endowments of natural resources can be a blessing or a curse, these resources, especially the alluvial diamond deposits, have been a curse for sierra leone as they are for many other countries that have found themselves embroiled in wars over abundant resources. Since i first published this book i have received virtually tens of thousands of pieces of correspondence from people all around the world telling me how utilizing the information. Many of the worlds poorest countries possess significant reserves of oil and other. Pdf the evolution of the natural resource curse thesis. Often termed the resource curse, much of the research on the relationship between natural resource development and economic underdevelopment has been conducted at the national, regional, or. In this paper we examine the interaction between oilexport revenue and longrun economic growth in algeria during the period from 1979 until 20.
In general, political scientists find that governments are more responsive to their citizens and are more likely to transition. A paradoxical situation in which countries with an abundance of nonrenewable resources experience stagnant growth or even economic contraction. The curse of natural resources earth institute columbia. Since i first published this book i have received virtually tens of thousands of pieces of correspondence from people all. Natural resource dependency also prohibits the development of institutions needed to overcome the resource curse, such as the rule of law, property rights, and democracy. The institutional theory addresses the problem of the resource curse from the institutional perspective.
In the bible we can see sickness, pestilence, blindness, madness. Natural resource wealth, particularly oil wealth, has made it more likely for governments to become or remain authoritarian over the past 30 years. This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natu ral resources. The notion of the resource curse goes back to the 18th century, but the realities are more complex than the term might suggest mark tran thursday 25 october 2012 14. Norways catching up with and forging ahead of its neighbors growth studies show, counter to intuition, that the discovery of a natural resource may be a curse rather than a blessing since resourcerich countries grow slower than others. Oct 25, 2012 daniel lederman and william maloney, for instance, have suggested that natural resources are neither curse nor destiny, asserting instead that its a mixed bag. Crosscountry evidence of the natural resource curse there are, indeed, resourcerich countries that bene.
This research firstly frames that literature conceptually by giving an exact overview of the development of the terminology and symptoms of the resource curse. In this analysis, we will try to show the most important characteristics of natural resources curse in the countries with a high. Published in volume 49, issue 2, pages 366420 of journal of economic literature, june 2011, abstract. Are natural resources a blessing or a curse for developing. Starting with the work of sachs and warner 1995, however, they suggest that natural resources have a negative effect often called the resource curse on economic growth mikesell, 1997. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization and. The resource curse data supported this perspective. The civil war literature also points to the instabilities caused by incoherent political regimes hegre, ellingsen, gates, and gleditsch 2001. This is the phenomenon known as the natural resource curse.
Empowering communities to manage natural resources. Its government debt is very small, inflation is low and hydrocarbon wealth. Her research focuses on environmental and resource economics, particularly natural capital accounting, sustainability, fossil fuel subsidies, and the resource curse. Its time for africas leaders to address the problems that hinder the development of the continents natural resources. The natural resource curse harvard dash harvard university. The views expressed in this article are those of the author and not those of the open society institute. Why natural resources are a curse on developing countries and. The share of natural capital in total national wealth resource dependence, has a significantly negative effect on public education expenditures relative to gdp. Sachs and warner, who have done a number of pioneering empirical studies on the issue, say that a natural resource curse is a reasonably solid fact sachs and warner, 1999, while some others. The paper concludes with a consideration of institutions and policies that some commodityproducers have tried, in efforts to overcome the pitfalls of the curse. Curses are the results of disobedience either from self or through the family line. The curse of natural resources a developmental analysis in. It then examines explanatory models and theories for the resource curse for their. Explanations of the tendency for natural resource abundance to immiserise growth and development the resource curse have traditionally followed four approaches.
This adverse effect is robust to excluding outliers and remains highly. Regional analysis of resource curse hypothesis revealed that south asia is the only region where resource curse exists with all types of resources because of low level of institutions. Table1 regressionofeconomicgrowthonnaturalresourceabundance,19701990,controllingforgrowth inthe1960s loggdp1970. V public disclosure authorized natural resources and violent. Escaping the natural resource curse and the dutch disease. The empirical evidence suggests that either outcome is possible. V public disclosure authorized natural resources and. The term resource curse encompasses the significant social, economic and political. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. Palley is the director of the globalization reform project at the open society institute. When does natural resource abundance lead to a resource.
Why natural resources are a curse on developing countries. By improving sanitation and hygiene, we can make it harder for parasites to. The term resource curse encompasses the significant social, economic and political challenges that are unique to countries rich in oil, gas and minerals. The natural resource curse has attracted demands for more research in recent literature. Sachs and warner 1995 report a negative relationship between gdp growth per capita between 1970 and 1989 and the share of nr exports in 1971 in a sample of 97 developing countries. But we can turn the curse back on the parasites that are its avatars. The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources such as fossil fuels and certain minerals, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.
One key problem is dutch disease, whereby the real exchange rate. One culprit may be the socalled dutch disease, whereby resource revenues raise a country. Our empirical analysis shows that oil revenue has a positive effect on economic growth. Due to this time series property our proxy for institutional quality is the degree of democracy. The statistical evidence on natural resources and economic performance b.
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