In search of the missing resource curse the world bank. Institutions, economic growth, and the curse of natural. However, sachs and warner 2001 show, puzzlingly, that countries with great natural resources tend to grow slower than countries that have fewer resources at their disposal. The curse of natural resources earth institute columbia. In many countries, natural resources have been detrimental to the economic development. The literature on the resource curse shows a bleak relationship. An influential study by jeffrey sachs and andrew warner found a strong correlation between natural resource abundance and poor economic growth. How can countries escape the natural resource curse. The first focuses on how natural resources affect the econ.
We show that when political institutions are cohesive and power is shared among the diverse groups in a multiethnic society, political. Natural resources and economic development the curse of natural resources. Implications and lessons for natural resourcerich countries anne hong, a. For some examples of the evidence, sachs and warner 1997 show regression evidence of the curse of natural resources with as many as nine additional regressors, and sachs and warner 1995 show regression evidence for the curse after controlling for popular variables favored by. Escaping the resource curse lays out a path for radically improving the management of the worlds natural resources. Some, such as jeffrey sachs, use conventional economic theory to. Shifts focus from economic growth data to human development and sustainable savings. These surveies, which include auty 1990, gelb 1988, sachs and warner 1995, 1999, and gylfason et al. Oct 25, 2012 in an influential study by jeffrey sachs and andrew warner, covering 97 countries between 197189, it was found that natural resource exporters grew at appreciably lower rates than other countries. A large literature has developed that documents a negative association between the presence of natural resources and economic development. Jeffrey sachs, now of columbia university in new york, showed that. This explanation for poor economic growth is now widely accepted. They found that dependence on natural resources was connected to low levels of economic growth.
In a new cgd working paper, we look at nigeriaoften seen as the prime example of a country cursed by its wealth. Pdf natural resources and economic development the curse of. The naturalresource curse is now a staple in the development. Natural resource abundance and economic growth by jeffrey d. Sachs and warner found a negative relationship between natural resources and economic growth, concluding that natural resources are a curse. The reference curse refers to a complex phenomenon that resource abundant countries neglect to take the advantages using their natural resources. Sachs and warner 1995 found a negative relationship between natural resources and economic growth, concluding that natural resources are a curse. Other resources, such as land or human resources,have more diffuse rents and do not seem to have such an effect. Escaping the resource curse 1 contents introduction macartan humphreys, jeffrey sachs and joseph stiglitz 4 section i upstream issues chapter 1. We test this theory building on sachs and warners in. We test this theory building on sachs and warners influential works on the resource curse. In the resource curse literature, the most commonly cited work is by sachs.
Gylfason 2001a informs us that nigeria, despite commanding vast oil riches, has the same gross national product that it had forty years ago. The natural abundance once thought to be a blessing was unconditionally, and then later only conditionally, a curse for political and economic development. We show that when political institutions are cohesive and power is shared among the diverse groups in a multiethnic society. 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.
Corruption, development and the curse of natural resources jstor. Two years later, the economists jeffrey sachs and andrew warner initiated the big statistical literature on the subject. Yet countries that are abundantly endowed with such natural resources often encounter pitfalls that interfere with the expected superior economic performance. Distinguishes the effects of different resources from an institutional perspective. 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. And to what extent do cohesive and democratic institutions facilitate this process. The resource expletive is normally defined as the inclination of provinces with big militias of natural resources, such as oil or diamonds, to be less developed than similar provinces missing such resources. A survey of diagnoses and some prescriptions oil, minerals, and agricultural resources can bring great riches to those who possess them. One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than naturalresourcescarce economies.
Tw o lines of explanation have emerged to explain the natural resource curse. A vast literature on the resource curse has linked pointsource geographically localized natural resources like oil, gas and minerals to slow economic growth auty 1993. Environment and energy program, international finance and macroeconomics program. One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly. One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural resourcescarce economies. The curse of natural resources and human development. 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. Countries with large endowments of natural resources, such as oil and gas, often perform worse in terms of economic development and good governance than do countries with fewer resources. Naturalresourcesandeconomicdevelopment thecurseofnaturalresources.
This paper surveys a variety of hypotheses and supporting evidence for why some. Sachs and warner, 1995, and mehlum, moene and torvik, 2006. Introduction the resource curse is the theory that countries with an abundance of natural resources, such as oil and minerals, achieve less economic growth than countries that are not endowed with natural resources. It is widely believed that natural resources can be detrimental to development and good governance. Natural resources discovery in developing countries, especially in africa, rather than yielding sustainable socioeconomic advantage to those countries. The curse of natural resources a developmental analysis. Escaping the natural resource curse and the dutch disease. In an influential study by jeffrey sachs and andrew warner, covering 97 countries between 197189, it was found that natural resource exporters grew at appreciably lower rates than other countries. No country that relied heavily on natural resources had an economy that grew rapidly, but many countries that relied very little on natural resources had economies that grew rapidly.
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. The curse of natural resources a developmental analysis in a comparative context. It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. When used well, these resources can create greater prosperity for current and future generations. View references in econpapers view complete reference list from citec. Introduction it has been observed for some decades that the possession of oil, natural gas, or other valuable mineral deposits or natural resources does not necessarily confer economic success. The curse of natural resources in fractionalized countries. Explores the historical roots of institutions that can cope. There is a curious phenomenon that social scientists call the resource curse auty 1993.
Paradoxically, despite the prospects of wealth and opportunity that accompany the discovery and extraction of. Various economists have sought to explain how a rich natural resource endowment could be a curse rather than a blessing for economic development. The empirical evidence suggests that either outcome is possible. The curse of natural resources request pdf researchgate. View references in econpapers view complete reference list from citec citations. Gylfason 2001a informs us that nigeria, despite commanding vast oil riches, has the same gross national product that. For some examples of the evidence, sachs and warner 1997 show regression evidence of the curse of natural resources with as many as nine additional regressors, and sachs and warner 1995 show regression evidence for the curse after controlling for popular variables favored by four other empirical growth studies. Many african countries such as angola, nigeria, sudan, and the congo are. Corruption, development and the curse of natural resources. Sachs and warner 1995 argue that the impact of natural resources on economic development is negative, and the finding has been labeled the natural resource curse 1 havranek et al. More natural resources push aggregate income down, when institutions are grabber friendly, while more resources raise income, when institutions are producer friendly.
Pdf natural resources and economic development the curse. Sachs and warners use of the share of natural resources in total exports as a poor measure of natural resource wealth, claiming that a dependence on natural resources was endogenous. There are authors that argue this point auty 1990, gelb 1988, sachs and warner 1995, 1997, 1999 and there are those that believe the resource. The term resource curse refers to the idea that the possession of natural resources particularly in the form of oil or minerals does not necessarily lead to economic success, and that resource wealth can even have a structural negative impact on longterm. 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.
Escaping the resource curse columbia university press. The resource curse is the theory that countries with an abundance of natural resources, such as oil and minerals, achieve less economic growth than countries that are not endowed with natural resources. Article pdf available in journal of economic literature 492. We conclude that there are many open questions and that the case of the curse needs revision and nuance. The problem of diversion of resources joe stiglitz 22 chapter 2.
Warner wonder whether the debilitating effect of resource wealth works indirectly through other factors affecting growth. Abstract this thesis explores the model of natural resource curse proposed by jeffrey sachs and andrew warner 1995 in two parts. By definition, resource curse, also called the paradox of plenty, refers to a situation where countries endowed with a natural resource curse tend to record slow economic growth as compared to countries with fewer natural resources. One day soon poor countries may actually benefit from their natural resources. The debate over the curse of natural resources has. View citations in econpapers 686 track citations by rss feed. We reexamine the relationship between oil wealth and political regimes, challenging the conventional wisdom that such natural resource rents lead to authoritarian outcomes. The resource curse of natural resources freebooksummary. Sachs and warners work on the existence of the resource curse is accepted by many others working in this field. In this paper we explore the empirics and theories of the socalled resource curse and try to assess its robustness. Sachs and warner 1995, 2001, have argued empirically that since the 1960s the resourcerich developing countries across the world have grown slower than other developing countries. This not at all uncommon scenario convinced sachs and company that the resource curse was a real thing. The curse of oil the paradox of plenty special report.
Institutions, economic growth, and the curse of natural resources 5 fraser institute questions to be answered 1 why might natural resources be a curse. This is a timely and important contribution to the debate on the socalled resource curse and how to avoid itespecially important in a time of concern about energy security and sustainable economic development. Political institutions and the curse of natural resources vox, cepr. Institutions and the resource curse mehlum 2006 the. Moreover, a universally accepted theory of the resource curse is lacking, although most explanations of the resource curse rely on a crowdingout logic, which, as simplified by sachs and warner. 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. We provide an alternative econometric framework for evaluating the resource curse.
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