The Political Economy of the Resource Curse: A Development Perspective

Abstract

This article reviews the recent literature on the developmental effects of resource abundance, assessing likely effects and channels with respect to key development outcomes. To date, this area has received less analysis, although it is relevant to the United Nations’ Sustainable Development Goals agenda, as a significant number of the world's poor live in African resource-rich economies. We argue that the presence of a natural resource sector per se does not necessarily translate into worse development outcomes. The natural resource experience varies to a significant extent. Countries with similar levels of resource rents can end up with significantly different achievements in terms of income inequality, poverty, education, and health. The challenge is to explain the different natural resource experiences. A pivotal mechanism behind the developmental effects of the natural resources sector is the type of states and political institutions that resource-abundant economies develop. Expected final online publication date for the Annual Review of Resource Economics, Volume 13 is October 2021. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

Government infrastructure investment stimulation through booming natural resources: Evidence from a lower-middle-income country

“…If the Revenue Sharing Fund received is inadequate, the central government provides the General Allocation Fund (DAU) and the Special Allocation Fund (DAK) as a regional financial balance in order to carry out the duties and functions of government and public services. Revenue from resources obtained, the government needs to decide how much resources to take in the current period and how much to leave for the future [ 41 ].…”

“…Regional income from natural resources can be utilized to accelerate economic growth through the provision of adequate and equitable infrastructure facilities. Research on economic development can be driven by the wealth of natural resources available [41][42][43]. However, regions with abundant natural resources also have the potential for social conflict [44][45][46].…”

Inclusive human development effect of financial inclusion in sub‐Saharan Africa: A gender perspective

“…We control for natural resource endowment since it has been used as a determinant of human development (Sinha & Sengupta, 2019) even if the nature of its effect is controversial. Savoia and Sen (2021) argue that the endowment of natural resources may distort the allocation of talent by favouring the orientation of students towards specialization that provides better access to resource rents, especially in developing countries with weak governance. Following the resource curse literature, we assume that natural resource endowments are detrimental to inclusive human development in SSA.…”

Conceptualizing the fiscal state: implications for sub-Saharan Africa

“…In many countries, the reliance on rents has demotivated productive investment in the broader economy and limited economic diversification (e.g. Beblawi, 1987; Karl, 1997; Ross, 2016; Savoia and Sen, 2021). Reliance on rents will tend to be self-reinforcing; as the large amounts of ‘unearned income’ provides little incentive to invest in economic diversification, which implies that the composition of revenue comprising a heavy reliance on rents is maintained, if not exacerbated in the future (Ross, 2016).…”