What Resource Curse?

Source: Foreign Policy, Charles Kenny (12/6/10)

"The resource curse must have been enchanted by a pretty feeble witch."

The idea that the more stuff dug out from on or under a country, the slower it will grow really picked up steam in the mid-1990s, when Jeffrey Sachs and Andrew Warner, then both at Harvard University, found that countries that exported more agricultural products, minerals, and fuels saw slower economic growth.

But recent research suggests otherwise.

Looking at recent growth across countries, Swiss economist Christa Brunnschweiler concludes that economies with greater resource wealth actually grew faster between 1970 and 2000 than resource-poor countries. She also finds no evidence that greater resource wealth is associated with weaker institutions, a finding repeated by Daron Acemoglu at the Massachusetts Institute of Technology.

Together with her colleague Erwin Bulte, Brunnschweiler also looked at the link between natural resources and civil disorder. They found that countries with more natural resource wealth were less likely to descend into civil war in the first place. Elsewhere, Stephen Haber and Victor Menaldo of Stanford University and the University of Washington, respectively, studied the relationship between oil revenues and democracy over time across countries. They found that democracies were actually made more resilient by growing oil revenues—while they couldn't find an impact one way or another when it came to autocracies.

How to reconcile these results with all the papers and articles that find a curse? Earlier studies looked at the importance of natural resource exports at a particular moment in time. There, the relationship holds—high dependence on resource exports is associated with lower growth and risk of civil war. But that's a strange way to measure "the curse of resources." Happily for those countries stuck atop piles of diamonds or lakes of oil, then, it turns out the resource curse must have been enchanted by a pretty feeble witch.

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