Natural resource curse thesis

Although it is often assumed that oil wealth leads to the formation of a distributive state that generously provides services in the areas of water, sanitation, education, health care, or infrastructure Not surprisingly, given this geographical pattern, explanations usually stress cultural factors in the form of a work ethic or type of political regime or environmental factors the level of urbanisation or the natural resource endowment.

Google Scholar Elliot, C. Knight and R.

Causes of resource curse

The abundant revenue from natural resource extraction discourages the long-term investment in infrastructure that would support a more diverse economy. A nation finds ample natural resource reserves 2. The attempts at diversification that do occur are often grand public works projects which may be misguided or mismanaged. When a country's chaos and economic policies scare off foreign investors and send local entrepreneurs abroad to look for better opportunities, the economy becomes skewed. Google Scholar Copyright information. This is a modified version of a paper from World Development, Auty, R. This bargain establishes a political relationship between rulers and subjects. There are concrete steps the international community can take to help break this curse First, a few facts. First, the prospect of resource rents may be an incentive to rebel or secede. Countries with more diversified economies tend to weather global economic cycles better than countries with concentrated economies. Google Scholar Wade, R. Google Scholar Rodrik, D. Google Scholar Armas, A. One study re-examined the Haber-Menaldo analysis, using Haber and Menaldo's own data and statistical models. Google Scholar Tsiang, S.

Higher wages make the national currency less competitive 5. The abundant revenue from natural resource extraction discourages the long-term investment in infrastructure that would support a more diverse economy.

resource curse examples

Econometric studies confirm that the risk of civil war greatly increases when countries depend on the export of primary commodities, particularly fossil fuels. Second, wealth from resources may enable rebel groups to finance their operations.

Chenery and T. The causation goes in the opposite direction: conflicts and bad policies created the heavy dependence on exports of natural resources. This is a modified version of a paper from World Development, Auty, R. Submit a letter to the editor or write to letters theatlantic.

Resource curse countries list

However, even when the authorities attempt diversification in the economy, this is made difficult because resource extraction is vastly more lucrative and out-competes other industries. If the resource prices fall, however, the governments' capacity to meet debt repayments will be reduced. We review the theoretical mechanisms through which natural resource wealth might slow economic growth, and then the empirical studies that test for an effect overall, or an effect on factors typically associated with economic growth. These initiatives are largely voluntary, and thus unenforceable. Google Scholar Elkan, W. It reports that their conclusions are only valid for the period before the s, but since about , there has been a pronounced resource curse. Consistent with the use of force to gain power, positive price shocks also induce an increase in paramilitary violence and reduce electoral competition: fewer candidates run for office, and winners are elected with a wider vote margin.

The fate of such proposals, like so much in global economic governance today, will depend on whether they can win support from governments and corporations not only in the OECD world, but also within the dynamic emerging economies that are driving today's global growth.

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The Evolution of the Natural Resource Curse Thesis: A Critical Literature Survey