The resource curse: A statistical mirage?

Abstract

A surprising feature of resource-rich economies is slow growth. It is often argued that natural-resource production impedes development by creating market or institutional failures. This paper establishes an alternative explanationa slow-growing resource sector. A declining resource sector is disproportionally reected in resource-dependent countries but appears to have little aect on the rest of the economy. More generally, this paper illustrates the importance of considering industry composition in cross-country growth regressions.and Finance at the University of Wyoming, the Center for the Analysis of Resource Rich Economies at the University of Oxford and two anonymous referees for helpful comments and suggestions. All errors are my own.1 Without natural resources life itself is impossible. From birth to death, natural resources, transformed for human use, feed, clothe, shelter, and transport us. Upon them we depend for every material necessity, comfort, convenience, and protection in our lives. Without abundant resources prosperity is out of reach. Giord Pinchot.others have similarly tested for a resource curse (Papyrakis and Gerlagh, 2007;Williams, 2010;James and Aadland, 2010), this methodology has since been heavily criticized.Perhaps most notably, Brunnschweiler and Bulte (2008) question whether a negative correlation between resource dependence and growth implies an underlying story of causation.More specically, they argue that such cross-sectional regressions suer from problems of reverse causality. Because resource dependence is dened as resource earnings relative to income, poorer countries that may grow relatively slowly will tend to be more resource dependent than their wealthier, perhaps faster growing counterparts. Using a cross-section of 1 Sachs and Warner dene resource dependence as exports of primary products relative to total exports.Equation (1) is a simplied version of Sachs and Warner's main estimation equation which includes a variety of relevant controls.

Resource-Economic Growth Nexus, Role of Governance, Financial Development, Globalization, and War: A Dynamic Approach

“…The findings from the main model report that oil rent was positively and significantly associated with economic growth. This finding coincides with that of several prominent studies documenting that resource abundance amplifies economic growth (Alexeev and Conrad 2009, Arezki and Van der Ploeg 2007, Cavalcanti et al 2011a, b, Smith 2015, James 2015. and Warner (1995and Warner ( , 1999and Warner ( , 2001.…”

“…The second strand argues that resources are important for modern economies, where they are considered an indispensable factor for producing major goods and services. Studies have revealed that resource abundance amplifies economic growth (Alexeev and Conrad 2009, Arezki and Van der Ploeg 2007, Cavalcanti et al 2011a, b, Smith 2015, James 2015. For instance, Cavalcanti et al (2011a) reported that the negative association between resource and growth is a methodological choice.…”

Dynamics between economic growth, labor, capital and natural resource abundance in Iran: An application of the combined cointegration approach

“…Whereas, Frankel (2010) concludes that commodity exporting countries perform well and control the crowding out effect of resource endowment. James (2015) suggests that the Contents lists available at ScienceDirect journal homepage: www.elsevier.com/locate/resourpol resource curse depends on industry makeup, because it has little effect on non-resource sectors. In a nutshell, the debate on natural resource abundance and economic growth is still of great interest to both researchers and policy makers.…”

Institutions and Return Predictability in Oil-exporting Countries

“…Leite andWeidmann (1999) andVicente (2010) suggest that the causality can run in either direction, and that the availability of natural resources can reduce the efficiency of a country's institutions. James (2015) interprets the resource curse in terms of commodity price trends, since resource-rich countries grow more slowly when the commodity they depend on experiences price declines. See van der Ploeg (2011) for an encompassing review of the literature on this topic.…”