The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings

TLDR: The authors evaluate the empirical basis for the so-called resource curse and find that, despite the topic's popularity in economics and political science research, this apparent paradox may be a red herring.

About: This article is published in Journal of Environmental Economics and Management.The article was published on 2008-05-01 and is currently open access. It has received 966 citations till now. The article focuses on the topics: Resource dependence theory & Resource curse.

Figures

Table 2. Institutional quality and natural resources

Table 6. Mineral dependence, constitutions and institutions, and their impact on economic growth (3SLS)

Table 1. Descriptive statistics of main variables

Figure 1. GDP share of mineral exports and income growth Notes: Detailed regression results are given in Table 5, column (1).

Table 4. Mineral dependence and institutions in democracies

Frequently asked questions

Q1. What contributions have the authors mentioned in the paper "The resource curse revisited and revised: a tale of paradoxes and red herrings" ?

In this paper, the authors evaluate the empirical basis for the so-called resource curse and find that, despite the topic 's popularity in economics and political science research, this apparent paradox is a red herring. 

Q2. What is the strongest instrument for a large sample of countries?

Latitude proved the strongest instrument for a large sample of countries, followed by the log of settler mortality (for the much smaller sample of ex-colonies only). 

Q3. What is the main causal mechanism linking resources to poor performance?

The main causal mechanism linking resources to poor performance is commonly hypothesized to be “executive discretion over resource rents” (Jensen and Wantchekon 2004). 

Q4. What is the problematic effect of natural resource exports?

In the words of arecent World Bank publication (Harford and Klein 2005):“[Natural resource exports] can damage institutions (including governance and the legal system) indirectly––by removing incentives to reform, improve infrastructure, or even establish a well-functioning tax bureaucracy––as well as directly––by provoking a fight to control resource rents. … 

Q5. How many countries have exported more than 0.4 share of their GDP?

Nepal and Burkina Faso have exported next to no mineral resources relative to their GDP, while Trinidad and Tobago and Zambia again top the list with a GDP share of over 0.4. 

Q6. Why is the resource curse more likely to materialize in presidential regimes?

The reason is that presidential regimes and majoritarian rules imply that the incumbent decision maker is not dependent on a stable majority among the legislators, and is therefore more likely to cater to the interests of powerful minorities (for more information, refer to Persson et al. 2000, PT 2003). 

Q7. What is the effect of resource abundance on the degree of resource dependence?

The less-than-proportional impact of resource abundance on the degree of resource dependence would further confirm their hypothesis that the traditional resource dependence variable is only a weak proxy for true resource abundance. 

Q8. What is the reason for the results so far?

One possible objection could be that the results so far are mainly due to the circumstances in non-democratic and authoritarian developing countries (which are also considered presidential in the dummy classification). 

Q9. What is the relationship between the presidential regime dummy and mineral resource dependence?

Consistent with their expectations, the authors find that the presidential regime dummy is positively correlated with mineral resource dependence, and remains significant at least at the 5%-level even when the authors control for regions and institutional quality.