The first explanation, sug gested by prebisch 1950 and singer 1950, is known as prebischsinger hypothesis. The three norwegians showed that there is only a conditional resource curse in the sense that there is a negative correlation between resource abundance as measured by the ratio of primary exports to gdp in 1970 and economic growth for countries with low institutional quality. Popular perceptions of corruption, poverty and the resource curse in the oilrich gulf of guinea can be caricatured as belonging to or falling between two possible positions. N2 this thesis examines various issues related to intranational and international trade, fiscal decentralization, trade openness, economic diversity, resource curse and economic growth all within a canadaus subnational framework. 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. Do reduced costs of factor mobility mitigate dutch disease symptoms, to the extent that they are reversed. Sachs and warner, 1995, and mehlum, moene and torvik, 2006. The natural resource curse, fiscal decentralization, and agglomeration economies, oxcarre working papers 112, oxford centre for the analysis of resource rich economies, university of oxford. This explanation for poor economic growth is now widely accepted. The origins of the idea of the natural resource curse in economics dates back to the late 1950s and early 1960s in the netherlands. The term resource curse encompasses the significant social, economic and political.
I am using the charity global witness logo to promote. Subsaharan africa, in particular, has become a classic case of the resource curse the paradox that regions endowed with natural resources tend to have dismal economic performance. Environment and energy program, international finance and macroeconomics program. 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. Pdf examining the natural resource curse and the impact. The growth effect of resources appears to be conditional on the quality of institutions in the nonresource sector. Corruption, development and the curse of natural resources volume 44 issue 2 shannon m.
Introduction what is the problem with natural resource wealth. By investigating resource curse effects in all federations for which complete data is available at the regional level it is observed that within federations resource abundance is more of a blessing than a curse while between them the curse remains. There is a group of scientists like as, frankel from harvard kennedy school, or olayele from victoria university that affirms that exist and natural resource curse phenomena, which make naturalresourcescountries destinated to be under poverty and in a low growth rate. Canada and the us, olayele 2010 finds some evidence indicating that production of minerals. Same with the interactive effect of diversity on resources. Based on the krugman specialization index, our analysis shows that the required threshold for not having the resource. Such deposits are assets, part of a countrys natural capital find, read. Yet countries that are abundantly endowed with such natural resources often encounter pitfalls that interfere with the expected superior economic performance. Thus, even if the subnational government does not affect the resource. Causes, consequences and prescriptions laura paler1 prepared for the open society institute local government and public service reform initiative lgi and the revenue watch institute march 1, 2011 1department of political science, columbia university.
Many resourcerich african countries have little or nothing to show for their wealth. Oil, corruption and the resource curse by nicholas. The case of federations provides an indication they do. Corruption, development and the curse of natural resources jstor. 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. The goal is to explain why countries with weak institutions and many powerful groups do not perform well in terms of growth in particular, in this setting, windfall gains translate into lower growth. Economic fluctuations and growth, political economy the paper studies the effect of additional government revenues on political corruption and on the quality of politicians, both with theory and data. A survey of diagnoses and some prescriptions oil, minerals, and agricultural resources can bring great riches to those who possess them.
Dec 11, 2007 popular perceptions of corruption, poverty and the resource curse in the oilrich gulf of guinea can be caricatured as belonging to or falling between two possible positions. The resource curse and oil revenues in angola and venezuela. Economic fluctuations and growth, political economy. When used well, these resources can create greater prosperity for current and future. However, through the fixed effects technique, we provide evidence for the role of economic diversity as a transmission channel of the resource curse. Mining should not be subject to special fiscal treatment, argues research presented by robert conrad associate professor of public policy and economics, duke university at the international growth centres growth week 2012. Dutch disease, factor mobility costs, and the alberta. Several explanations for the resource curse have been offered in the literature. It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. Trade, fiscal transfers, diversity and the resource curse. Due to statistically insignificant coefficients, the gmm framework does not provide us with predictive power to test the resource curse proposition. By investigating resource curse effects in all federations with available statelevel data, it is observed that within federations resource abundance is a blessing, while between federations it is a curse, similar to results.
That experience, though common, is far from inevitable. The case of federations provides an indication for this. Natural resource revenues have also been linked to slow economic growth rates, inequality, and poverty. On the tradeoff between resource abundance and development 1. As this year may or may not ring in the end of the political union between scotland and england established by the act of union in 1707, it is an appropriate time to remember that one of the key events leading to this act happened in latin america, at the gulf of darien, which is now on the border between colombia and panama as well as on the junction of central and south america. May 21, 20 the three norwegians showed that there is only a conditional resource curse in the sense that there is a negative correlation between resource abundance as measured by the ratio of primary exports to gdp in 1970 and economic growth for countries with low institutional quality. Institutions, economic growth, and the curse of natural resources 1 fraser institute executive summary the impact of natural resources on economic growth has been a subject of intense debate over the past couple of decades. Department of economics, lancaster university management school, lancaster la1 4yx, united kingdom. This is the phenomenon known as the natural resource curse. But to understand what conditions allow oil wealth to contribute to development, one must specify what is meant by development and distinguish among the hypothesized effects of the. A state and provincial analysis bankole fred olayele. We use dynamic panel data models on data on canadian and us subnational jurisdictions.
This note presents a simple model of how resource rents can affect economic growth of a region of a centralized country, where subnational governments have no authority over resource industries. Sachs and warner found a negative relationship between natural resources and economic growth, concluding that natural resources are a curse. We provide an alternative econometric framework for evaluating the. Breaking the curse in africa yes, the resource curse. In many countries, natural resources have been detrimental to the economic development. 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.
The resource curse 349 theory of the resource curse, oil is an obstacle to development in poor countries. Resource curse, institutions and nonresource sector. Institutions, economic growth, and the curse of natural. A state and provincial analysis by bankole fred olayele download pdf 936 kb. A state and provincial analysis olayele 201002 elephants and the ivory trade ban.
A short film i created for my minor project at at university, highlighting the issue of blood diamonds. Botswana is one out of many developed and developing countries e. Summary of research results van kooten 201003 managing water shortages in the western electricity grids. Stiglitz there is a curious phenomenon that social scientists call the resource curse auty 1993. We find evidence for a positive relationship between diversity and growth. There is a gap in resource curse studies in relation to the former soviet. Jul 11, 20 there is a strong case to be made for making sure that at least part of the natural resource wealth of poor, resource rich countries is converted into human capital.
Everyday low prices and free delivery on eligible orders. Mining and the natural resource curse economics tutor2u. There is a strong case to be made for making sure that at least part of the natural resource wealth of poor, resourcerich countries is converted into human capital. The world bank estimates for the components of country wealth are only available for 1994 and, therefore, this is also the case for ratios such as the natural capital. Corruption, development and the curse of natural resources. Request pdf the resource curse countries that possess rich mineral deposits, it is widely assumed, are fortunate. The paper concludes with a consideration of institutions and policies that some commodityproducers have tried, in efforts to overcome the pitfalls of the curse. We provide an alternative econometric framework for evaluating the resource curse. Do reduced costs of factor mobility mitigate dutch disease symptoms. Antonio cabralesand esther hauk june 2007 abstract we propose a theoretical model to explain empirical regularities related to the curse of natural resources. Skeptics have questioned the natural resource curse, pointing to examples of commodity. The term resource curse encompasses the significant social, economic and political challenges that are unique to countries rich in oil, gas and minerals. This is an explicitly political model which emphasizes the behavior and incentives of politicians.
Natural resources, energy supply and economic growth. As a result of exporting large quantities of natural gas, the value of the guilder appreciated, dutch manufactures became uncompetitive and a period of. Olayele, bankole fred 2016 trade, fiscal transfers, diversity and the resource curse. Natural resource abundance and human capital accumulation. The resource curse the political and economic challenges of natural resource wealth nrgi reader march 2015 countries with nonrenewable resource wealth face both an opportunity and a challenge.
Summary of research results van kooten 201003 managing water shortages in the western electricity grids scorah, sopinka and van. Apr 30, 20 a short film i created for my minor project at at university, highlighting the issue of blood diamonds. Summary of research results van kooten 201003 managing water shortages in the western electricity grids scorah, sopinka and van kooten. The natural resource curse harvard dash harvard university. Countries with large endowments of natural resources, such as oil and gas, often perform worse in terms of economic development. Pdf the problem of the relevance of human and natural capital, as well as the potential adverse effect of natural capital on economic growth, has.
The study of the resource curse, and of governance and corruption more gener ally, began properly gaining traction as a. The goal is to explain why countries with weak institutions and many powerful groups do not perform well in terms of growth in particular, in this. First, the fault lies with oil companies, exploiting, bribing and otherwise abusing innocent africans. One culprit may be the socalled dutch disease, whereby resource revenues raise a country. Aims and research questions a particular innovation of the current research is related to a set of countries chosen for the analysis. 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. Chapter 1 provides the motivation for the study and sets the stage for the various empiricalbased policy tradeoffs and insights arrived at in the subsequent. The discovery of natural gas in the north sea was seen at the time as a boon, but it didnt turn out that way. Based on the krugman specialization index, our analysis shows that the required threshold for not having the. The political resource curse fernanda brollo, tommaso nannicini, roberto perotti, guido tabellini. The idea that resources might be more of an economic curse than a blessing began to emerge in debates in the 1950s and 1960s about the economic problems of low and middleincome countries. The term resource curse was first deployed in the formal economics. Oil, corruption and the resource curse projects at harvard.
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