Is There Really a Resource Curse? A Critical Survey of Theory and Evidence (Report)

This article provides a critical survey of the resource curse--the idea that mineral and fuel abundance generates negative developmental outcomes in less developed countries. In particular, it examines the idea that mineral and fuel abundance generates growth-restricting forms of state intervention, extraordinarily large degrees of rent seeking, and corruption, which are generally argued to be negative in terms of the developmental outcomes they generate. The analysis surveys the Dutch disease, rentier state, and rent-seeking versions of the resource curse and finds they have significant shortcomings in terms of theory and evidence. It also identifies some decisive factors that help determine the blessing threshold--below which the risk of a resource curse may be very high--in mineral and fuel abundant developing countries. Keywords: resource curse, economic performance, rentier state, rent-seeking models, resource abundance. THE RELATIONSHIP BETWEEN MINERAL AND FUEL WEALTH AND ECONOMIC DE-velopment has been the subject of intense debates over the past century. Central to the effect of mineral and fuel wealth on long-run economic growth is the stimulus that it can provide to industrial activities. One of the main lessons of world economic history of the past two centuries is that sustained economic growth is achieved with sustained and successful industrialization. (1) The idea that commodity exports generate domestic demand for manufactures has long been emphasized by development economists. (2) Similarly, the "staple thesis" demonstrated that growth in backward areas commonly began through the initial stimuli that primary product exports brought in terms of attracting capital and labor and inducing a more diversified production structure. (3) Natural resource rents, to the extent they are appropriated by state governments, can relax common resource constraints to growth; namely, the savings, foreign exchange, and fiscal constraints. (4)