Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum

Collier, Paul; Goderis, Benedikt

doi:10.2139/ssrn.1473716

“…Collier & Goderis (2007) use a panel cointegration approach to estimate a specified long-run equilibrium relationship between growth and resource-export prices, finding a negative long-run effect of price increases. Michaels & Lei (2011) examine whether giant oil field discoveries (defined as containing 500 million barrels of recoverable reserves) leads to armed conflict.…”

Section: Introductionmentioning

confidence: 99%

The resource curse exorcised: Evidence from a panel of countries

Smith¹

2015

Journal of Development Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper evaluates the impact of major natural resource discoveries since 1950 on GDP per capita and other economic and social indicators. Using panel fixed-effects estimation ad resource discoveries in countries that were not previously resource-rich, I find a positive effect on GDP per capita following extraction that persists in the long term, in contrast with much of the resource curse literature that uses cross-sectional designs. I also find positive effects on education levels, reductions in infant mortality, and negative effects on democratic institutions. I further test these outcomes with synthetic control analysis, yielding results consistent the fixed-effects model. and resource discoveries in countries that were not previously resource-rich, I find a positive effect on GDP per capita following extraction that persists in the long term, in contrast with much of the resource curse literature that uses cross-sectional designs. I also find positive effects on education levels, reductions in infant mortality, and negative effects on democratic institutions. I further test these outcomes with synthetic control analysis, yielding results consistent the fixed-effects model. Terms of use: Documents in

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“…The absence of developed financial institutions will also make it harder to manage macroeconomic volatility (Ploeg and Poelhekke, 2009). Finally, Collier and Goderis (2007) show that countries with bad governance suffer from a significant long-run adverse effect of higher non-agricultural commodity prices; while those with good governance enjoy a significant positive effect. The country is divided into 20 provinces with a central government located in Port Moresby.…”

Section: Governance and Institutionsmentioning

confidence: 91%

Papua New Guinea and the Natural Resource Curse

Avalos

¹

,

Stuva

²

,

Heal

³

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The ARTNeT Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about trade issues. An objective of the series is to publish the findings quickly, even if the presentations are less than fully polished. ARTNeT working papers are available online at www.artnetontrade.org. All material in the working papers may be freely quoted or reprinted, but acknowledgment is requested, together with a copy of the publication containing the quotation or reprint. The use of the working papers for any commercial purpose, including resale, is prohibited. Terms of use: Documents in EconStor may Disclaimer:The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Where the designation "country or area" appears, it covers countries, territories, cities or areas. Bibliographical and other references have, wherever possible, been verified. The United Nations bears no responsibility for the availability or functioning of URLs. The views expressed in this publication are those of the authors and do not necessarily reflect the views of the United Nations. The opinions, figures and estimates set forth in this publication are the responsibility of the authors, and should not necessarily be considered as reflecting the views or carrying the endorsement of the United Nations. Any errors are the responsibility of the authors. Mention of firm names and commercial products does not imply the endorsement of the United Nations.© ARTNeT 2013 This may also be exacerbated by large scale exports of liquefied natural gas (LNG) in future years. In addition, the paper finds that extractive industry governance is a pressing challenge for PNG and makes suggestions for reform in revenue management and spending. Executive SummaryThe 'natural resource curse' refers to the observation that some natural resource-rich countries experience lower economic growth than some natural resource-poor countries. For countries like Papua New Guinea (PNG), which rely on the extraction of natural resources (NR), the possibility of such a 'curse' is a pressing concern.Studies have identified three channels that could lead to a negative relationship between an abundance of natural resourc...

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“…Four variables are taken from the empirical growth literature: (i) trade openness, measured as the ratio of trade to GDP, (ii) external debt to GNI, (iii) inflation, measured as the consumer price index (cpi), and (iv) financial development, measured as the ratio of M2 to GDP. Following Collier and Goderis (2007), we also include indices of commodity export prices and oil import prices to control for the long-run effect of commodity prices on GDP. Section 2.1 explains how these variables were constructed.…”

Section: Data and Methodsologymentioning

confidence: 99%

Does Aid Mitigate External Shocks?

Collier

¹

,

Goderis

²

2008

Self Cite

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This paper investigates the role of aid in mitigating the adverse effects of commodity export price shocks on growth in commodity-dependent countries. Using a large crosscountry dataset, we find that negative shocks matter for short-term growth, while the ex ante risk of shocks does not seem to matter. We also find that both the level of aid and the flexibility of the exchange rate substantially lower the adverse growth effect of shocks. While the mitigating effect of aid is significant in both countries with pegs and countries with floats, the effect seems to be smaller for the latter, suggesting that aid and exchange rate flexibility are partly substitutes. We investigate whether aid has historically been targeted at shock-prone countries, but find no evidence that this is the case. This suggests that donors could increase aid effectiveness by redirecting aid towards countries with a high incidence of commodity export price shocks.

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Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum

Cited by 183 publications

References 44 publications

The resource curse exorcised: Evidence from a panel of countries

The resource curse exorcised: Evidence from a panel of countries

Papua New Guinea and the Natural Resource Curse

Does Aid Mitigate External Shocks?

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