V public disclosure authorized natural resources and. Not just roads and buildings, but all the things we use or consume food, clothes, books, toys, furniture, tools and vehicles are obtained from resources on this earth. Daniel lederman and william maloney, for instance, have suggested that natural resources are neither curse nor destiny, asserting instead that its a mixed bag. In this paper we explore the empirics and theories of the socalled resource curse and try to assess its robustness. One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural resource scarce economies. Skeptics have questioned the natural resource curse, pointing to examples of commodity exporting countries that have done well and arguing that resource exports and booms are not exogenous. 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 resource rich countries grow slower than others.
There are many theories and much academic debate about the reasons for, and exceptions to. 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. Natural resource curse stronger i n presidential democracies the average effect of natural r esources on growth across a sample of countries is thus not very informative. Are natural resources a blessing or a curse for developing. When does natural resource abundance lead to a resource curse.
The empirical evidence suggests that either outcome is. Natural resources, for most poor countries, are deemed to be more of a curse than a blessing. This is a phrase used to refer to the challenges and adversities that netherlands went through when it discovered north sea gas. It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. I present a model where natural resource abundance generates power struggles, thereby increasing the effective discount rate of the governing group. Clearly the relevant policy question for a country with natural resources is how to make the best of them. Power struggles and the natural resource curse lse research. Pdf on apr 1, 2016, ramez badeeb and others published the evolution of the natural resource curse thesis. Natural resource curse and poverty in appalachian america. 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. Addressing the natural resource curse imf elibrary. Environment and energy program, international finance and macroeconomics program.
Although some resource rich countries benefit from their natural wealth, others are in a terrible state. We aim to search answers for three related questions. The resource curse and oil revenues in angola and venezuela john l. Pdf the evolution of the natural resource curse thesis. A limitation of this study is that while coal mining is determined by geology and national and global demand, a nonrandom pattern of the location of coal mining may existin particular for mtm e. The present paper deals with the role of political authorities and institutions in explaining growth failures. Is there a natural resource curse on education spending. Yet countries that are abundantly endowed with such natural resources often encounter pitfalls that interfere with the expected superior economic performance. The natural resource curse also known as the paradox of plenty refers to the paradox that countries and regions with an abundance of natural resources, specifically p ointsource nonrenewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. A paradoxical situation in which countries with an abundance of nonrenewable resources experience stagnant growth or even economic contraction. About help faqs contact us print citation alert off. Why natural resources are a curse on developing countries. Avoiding the resource curse world resources institute.
As a result, the elite makes fewer investments in the. The resource curse describes the paradox where countries rich in oil, gas, and minerals remain largely impoverished. Many analysts suggested a historically positive association of natural resource abundance and. Better transparencyboth in how governments spend extractive revenues and how natural resource decisions are madecould help tackle this problem. How to combat the resource curse why nations fail why. The impact of natural resource dependence on public education expenditures. In this paper we show that economies with a high ratio of natural resource exports to gdp in 1971 the base year tended to have low growth rates during the. Nonetheless, it has been argued for some decades that large endowments of natural resources oil, gas, and minerals in particularmay actually become more of a curse.
On the one hand, the lack of natural resources has not proven to be a fatal barrier to economic success. The natural resource curse represents an obstacle to democracy and development. The empirical evidence suggests that either outcome is possible. The empirical evidence suggests either outcome is possible. The evidence suggests that countries with bad institutions are likely to experience the natural resource curse. It increases the exchange rate, thereby stifling other export industries. Natural resources are one of the four factors of economic growth. Resource curse, economic growth, inequality, institutions, real exchange rate, budget deficit, inflation.
The evolution of the natural resource curse thesis. According to the theory of the resource curse, poor countries with large endowments of natural resources, especially oil, often do not achieve sustainable economic growth because the size and volatility of oil revenues encourage corruption, mis. The resource curse thesis suggests that countries with a high dependence on natural resources suffer from negative macroeconomic and macropolitical effects. A while ago we discussed the economic and political dimensions of the resource curse see here, here, here, here and here. Her research focuses on environmental and resource economics, particularly natural capital accounting, sustainability, fossil fuel subsidies, and the resource curse. Examining the natural resource curse and the impact of various. Although the estimates presented are supportive of negative. One culprit may be the socalled dutch disease, whereby resource. A survey of diagnoses and some prescriptions oil, minerals, and agricultural resources can bring great riches to those who possess them. This phenomenon, known as the resource curse explains the history and perpetuation of violence in the drc. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources.
The findings are in alignment with the view that there is no clear deterministic evidence of natural resource abundance as a curse or a blessing. Strategies for conserving, protecting, and enhancing these resources should be based on the specific resource constraints faced in any given location, as well as the current and desired improvements in reversing depletion and degradation. The result was stronger dutch currency, poor performance of other sectors and industries, and volatility of commodity prices. Power struggles and the natural resource curse lse. Hence, we tentatively conclude that there may be a reversal in coal minings natural resource curse in appalachia. Author links open overlay panel pr atangana ondoa henri. A large literature has developed that documents a negative association between the presence of natural resources and economic development. The resource curse davis 2005 natural resources forum. Many oil, gas and mineralrich countries have failed to reach their full potential as a result of their natural resource wealth.
Published in volume 49, issue 2, pages 366420 of journal of economic literature, june 2011, abstract. This paper summarizes and extends previous research that has shown evidence of a curse of natural resources countries with great natural resource wealth tend nevertheless to grow more slowly than resource poor countries. Starting with the time of imperialism in the 1870s until now, the natural wealth of the congo seems only to decimate its economic growth and political stability. Legal remedies for the resource curse justice initiative. Almost without exception, the resourceabundant countries have stagnated in economic growth since the early 1970s, inspiring the term, curse of natural resources. The term resource curse encompasses the significant social, economic and political challenges that are unique to countries rich in oil, gas and minerals. In respect of these questions, three observations are made.
Aug 01, 2017 instead of benefiting and prospering the country and its citizen, the extraction of the natural resource causes significant and serious problems. The resource curse or excess availability of natural resources presents a particularly interesting analysis when it comes to economics and often underpins many of the policies and theories which can be looked at in relation to how the government can organise its own economic behaviour, so as to achieve longterm economic growth acemoglu, 1996. Apr 25, 2020 download 7page research paper on natural resource curse 2020. Why are many resource rich countries so poor and what can we do about it. Natural resource revenues have also been linked to slow economic growth rates, inequality, and poverty. Natural resource wealth, particularly oil wealth, has made it more likely for governments to become or remain authoritarian over the past 30 years. When does natural resource abundance lead to a resource. In general, political scientists find that governments are more responsive to their citizens and are more likely to. In terms of intellectual history, this negative view of mineral and fuel abundance goes against much of the earlier thinking on the subject. Escaping the natural resource curse and the dutch disease. Environment and energy program, international finance and macroeconomics program it is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. Although most studies report evidence of some type of resource curse, a signi.
The paper concludes with a consideration of institutions and policies that some commodityproducers have tried, in efforts to overcome the pitfalls of the curse. Abstract an abundance of natural resources is intuitively expected to be a blessing. The resource curse hypothesis is used to describe just such a situation, whereby an abundance of natural resources can lead to corruption and stagnation, or even economic contraction. A critical literature survey find, read and cite all the research you need on researchgate. Corruption, democracy and the natural resource curse richard damania1, and erwin bulte2 1 school of economics, university of adelaide, australia 5001, email. Expectations of resource booms and their impact jedrzej george frynas,geoffrey wood and timothy hinks abstract many resource rich countries have experienced a range of negative economic and political e. The resource curse and oil revenues in angola and venezuela.
In this paper we show that economies with a high ratio of natural resource exports to gdp in 1971 the base year tended to have low growth rates during the subsequent period 197189. Dec 06, 2010 enter the resource curse the idea that the more stuff dug out from on or under a country, the slower it will grow and the higher the risk it will descend into civil war. The challenge for sustainable management of natural resources is to find a balance. Can good institutions, measured by a single indicator, avoid this curse.
Explanations of the tendency for natural resource abundance to immiserise. We find that there is evidence of the natural resource curse, especially in the economies that have a strong. When resource extraction companies can obtain oil, diamonds, gold, coltan, timber, and other natural resources through covert contacts with unaccountable government officials, the losers are the people in the. Crosscountry evidence of the natural resource curse there are, indeed, resource rich countries that bene. Global history is full of illustrations of countries like sudan, nigeria, angola and netherlands whose natural resource wealth resource curse in form of conflict, corruption, and poverty. The nigerian experience provides telling confirmation of this aspect of natural resources. 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. The third debate is over whether the resource curse is real or illusory.
Nonetheless, it has been argued for some decades that large endowments of natural resources oil, gas, and minerals in particular may actually become more of a curse, often leading to slow economic growth and redistributive struggles including armed conflict. The only thing we get from outside is energy which we receive from the sun. In more precise usage, however, the resource curse embraces all the alleged negative effects of oil on development, while dutch disease refers to one aspect of the resource curse, the in. The concept of a resource curse, a term coined by economist richard auty in the 1990s, describes the pattern when countries with relatively more natural resources paradoxically fare worse. The curse of natural resources a developmental analysis in. Natural resources rents also cause volatility of gdp per capita, leading to low level of. There has been increasing interest in the socalled resource curse, i. We conclude that there are many open questions and that the case of the curse needs revision and nuance. This research has implications not only for the political economy of the resource curse hypothesis but also for existing theories on corruption and regulatory independence.
A new resource curse is fueling riots around the world. The term resource curse encompasses the significant social, economic and political. Empirical studies have shown that this curse is a reasonably solid fact. Explanations of the tendency for natural resource abundance to immiserise growth and development the resource curse have traditionally followed four approaches. Natural resources management and the environment in small. Can the natural resource curse be turned into a blessing. Are all types of natural resources exposed to a curse.
Empirical evidence suggests that the natural resource curse operates through the behavior of the political elite, yet there are few models that convincingly illustrate the mechanism at work. 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. Sep 06, 2005 legal remedies for the resource curse is a digest of practical experience in using law to combat corruption across jurisdictions. First, while the literature provides considerable evidence that natural resource abundance is associated with various negative development outcomes, this evidence is by no means conclusive.
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