1932
0
  1. Home
  2. A-Z Publications
  3. Annual Review of Resource Economics
  4. Volume 13, 2021
  5. Article

Annual Review of Resource Economics

Volume 13, 2021

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.

Keyword(s): human development, inequality, JEL D7, JEL N4, JEL O4, JEL P5, poverty, resource abundance, state capacity, Sustainable Development Goals
Loading

Article metrics loading...

/content/journals/10.1146/annurev-resource-100820-092612
2021-10-05
2024-04-19
Loading full text...

Full text loading...

/deliver/fulltext/resource/13/1/annurev-resource-100820-092612.html?itemId=/content/journals/10.1146/annurev-resource-100820-092612&mimeType=html&fmt=ahah

Literature Cited

  1. Acemoglu D. 2008. Oligarchic versus democratic societies. J. Eur. Econ. Assoc. 6:11–44
     [Google Scholar]
  2. Acemoglu D, Johnson S, Robinson JA 2005. Institutions as a fundamental cause of long-run growth. Handbook of Economic Growth P Aghion, SN Durlauf , Vol. 1 Part A 385–472 Amsterdam: Elsevier
     [Google Scholar]
  3. Acemoglu D, Naidu S, Restrepo P, Robinson JA 2015. Democracy, redistribution, and inequality. Handbook of Income Distribution AB Atkinson, F Bourguignon , Vol. 21885–1966 Amsterdam: Elsevier
     [Google Scholar]
  4. Addison T, Roe A 2018. Extractives for development: introduction and ten main messages. Extractive Industries: The Management of Resources as a Driver of Sustainable Development T Addison, A Roe Oxford, UK: Oxford Univ. Press https://doi.org/10.1093/oso/9780198817369.003.0001
    [Crossref] [Google Scholar]
  5. Ahlerup P, Baskaran T, Bigsten A. 2020. Gold mining and education: A long-run resource curse in Africa?. J. Dev. Stud. 56:91745–62
     [Google Scholar]
  6. Alexeev M, Conrad R. 2009. The elusive curse of oil. Rev. Econ. Stat. 91:3586–98
     [Google Scholar]
  7. Almeida dos Santos F. 2020. War in resource-rich northern Mozambique—six scenarios Rep., CMI Insight 2, Chr. Michelsen Inst. Bergen: Nor. https://www.cmi.no/Publications/7231-war-in-resource-rich-northern-mozambique-six-scenarios
  8. Andersen JJ, Aslaksen S. 2008. Constitutions and the resource curse. J. Dev. Econ. 87:2227–46
     [Google Scholar]
  9. Angeles L 2007. Income inequality and colonialism. Eur. Econ. Rev. 51:51155–76
     [Google Scholar]
  10. Aragón FM, Chuhan-Pole P, Land BC. 2015. The local economic impacts of resource abundance: What have we learned? Policy Res. Work. Pap. 7263, World Bank Washington, DC: https://doi.org/10.1596/1813-9450-7263
    [Crossref]
  11. Aragón FM, Rud JP. 2013. Natural resources and local communities: evidence from a Peruvian gold mine. Am. Econ. J. Econ. Policy 5:21–25
     [Google Scholar]
  12. Aragón FM, Rud JP. 2016. Polluting industries and agricultural productivity: evidence from mining in Ghana. Econ. J. 126:5971980–2011
     [Google Scholar]
  13. Arezki R, Gylfason T, Sy A. 2012. Beyond the Resource Curse: Policies to Harness the Power of Natural Resources Washington, DC: Int. Monet. Fund
  14. Arezki R, Ramey VA, Sheng L. 2017. New shocks in open economies: evidence from giant oil discoveries. Q. J. Econ. 132:1103–55
     [Google Scholar]
  15. Asadullah MN, Savoia A. 2018. Poverty reduction during 1990–2013: Did Millennium Development Goals adoption and state capacity matter?. World Dev 105:70–82
     [Google Scholar]
  16. Bazillier R, Girard V. 2020. The gold digger and the machine. Evidence on the distributive effect of the artisanal and industrial gold rushes in Burkina Faso. J. Dev. Econ. 143:102411
     [Google Scholar]
  17. Bebbington A. 2012. Social Conflict, Economic Development and Extractive Industry: Evidence from South America London: Routledge
  18. Bebbington A, Abdulai AG, Bebbington DH, Hinfelaar M, Sanborn C. 2018. Governing Extractive Industries: Politics, History and Ideas Oxford, UK: Oxford Univ. Press
  19. Bhattacharyya S, Hodler R. 2010. Natural resources, democracy and corruption. Eur. Econ. Rev. 54:4608–21
     [Google Scholar]
  20. Bhattacharyya S, Williamson JG. 2016. Distributional consequences of commodity price shocks: Australia over a century. Rev. Income Wealth 62:2223–44
     [Google Scholar]
  21. Besley T, Kudamatsu M. 2006. Health and democracy. Am. Econ. Rev. 96:2313–18
     [Google Scholar]
  22. Besley T, Persson T. 2011. Pillars of Prosperity: The Political Economics of Development Clusters Princeton, NJ: Princeton Univ. Press
  23. Bodea C, Higashijima M, Singh RJ. 2016. Oil and civil conflict: Can public spending have a mitigation effect?. World Dev 78:1–12
     [Google Scholar]
  24. Borge LE, Parmer P, Torvik R. 2015. Local natural resource curse?. J. Public Econ. 131:101–14
     [Google Scholar]
  25. Boschini AD, Pettersson J, Roine J. 2007. Resource curse or not: a question of appropriability. Scand. J. Econ. 109:3593–617
     [Google Scholar]
  26. Bourguignon F 2003. The growth elasticity of poverty reduction: explaining heterogeneity across countries and time periods. Inequality and Growth: Theory and Policy Implications TS Eicher, SJ Turnovsky 3–26 Cambridge, MA: MIT Press
     [Google Scholar]
  27. Brollo F, Nannicini T, Perotti R, Tabellini G. 2013. The political resource curse. Am. Econ. Rev. 103:51759–96
     [Google Scholar]
  28. Brunnschweiler CN. 2008. Cursing the blessings? Natural resource abundance, institutions, and economic growth. World Dev 36:3399–419
     [Google Scholar]
  29. Brunnschweiler CN, Bulte EH. 2008. The resource curse revisited and revised: a tale of paradoxes and red herrings. J. Environ. Econ. Manag. 55:3248–64
     [Google Scholar]
  30. Carmignani F. 2013. Development outcomes, resource abundance, and the transmission through inequality. Resour. Energy Econ. 35:3412–28
     [Google Scholar]
  31. Caselli F, Cunningham T. 2009. Leader behaviour and the natural resource curse. Oxf. Econ. Pap. 61:4628–50
     [Google Scholar]
  32. Caselli F, Michaels G. 2013. Do oil windfalls improve living standards? Evidence from Brazil. Am. Econ. J. Appl. Econ. 5:1208–38
     [Google Scholar]
  33. Cockx L, Francken N. 2014. Extending the concept of the resource curse: natural resources and public spending on health. Ecol. Econ. 108:136–49
     [Google Scholar]
  34. Cockx L, Francken N. 2016. Natural resources: A curse on education spending?. Energy Policy 92:394–408
     [Google Scholar]
  35. Collier P, Hoeffler A. 2009. Testing the neocon agenda: democracy in resource-rich societies. Eur. Econ. Rev. 53:3293–308
     [Google Scholar]
  36. Cotet AM, Tsui KK. 2013. Oil, growth, and health: What does the cross-country evidence really show?. Scand. J. Econ. 115:41107–37
     [Google Scholar]
  37. Cust J, Poelhekke S. 2015. The local economic impacts of natural resource extraction. Annu. Rev. Resour. Econ. 7:251–68
     [Google Scholar]
  38. Davis GA, Cordano ALV. 2013. The fate of the poor in growing mineral and energy economies. Resour. Policy 38:2138–51
     [Google Scholar]
  39. Dell M. 2010. The persistent effects of Peru's mining mita. Econometrica 78:61863–903
     [Google Scholar]
  40. Dollar D, Kleineberg T, Kraay A. 2016. Growth still is good for the poor. Eur. Econ. Rev. 81:68–85
     [Google Scholar]
  41. Easterly W. 2007. Inequality does cause underdevelopment: insights from a new instrument. J. Dev. Econ. 84:2755–76
     [Google Scholar]
  42. Ebeke C, Omgba LD, Laajaj R. 2015. Oil, governance and the (mis)allocation of talent in developing countries. J. Dev. Econ. 114:126–41
     [Google Scholar]
  43. Ebeke CH, Etoundi SMN. 2017. The effects of natural resources on urbanization, concentration, and living standards in Africa. World Dev 96:408–17
     [Google Scholar]
  44. Edwards RB. 2016. Mining away the Preston curve. World Dev 78:22–36
     [Google Scholar]
  45. El Anshasy AA, Katsaiti MS. 2013. Natural resources and fiscal performance: Does good governance matter?. J. Macroecon. 37:285–98
     [Google Scholar]
  46. Esposito E, Abramson SF. 2021. The European coal curse. J. Econ. Growth 26:77–112
     [Google Scholar]
  47. Farzanegan MR, Krieger T. 2019. Oil booms and inequality in Iran. Rev. Dev. Econ. 23:2830–59
     [Google Scholar]
  48. Farzanegan MR, Thum M. 2020. Does oil rents dependency reduce the quality of education?. Empir. Econ. 58:1863–911
     [Google Scholar]
  49. Fenske J, Zurimendi I. 2017. Oil and ethnic inequality in Nigeria. J. Econ. Growth 22:397–420
     [Google Scholar]
  50. Fum RM, Hodler R. 2010. Natural resources and income inequality: the role of ethnic divisions. Econ. Lett. 107:3360–63
     [Google Scholar]
  51. Gallego J, Maldonado S, Trujillo L. 2020. From curse to blessing? Institutional reform and resource booms in Colombia. J. Econ. Behav. Organ. 178:174–93
     [Google Scholar]
  52. Gamu J, Le Billon P, Spiegel S 2015. Extractive industries and poverty: a review of recent findings and linkage mechanisms. Extr. Ind. Soc. 2:1162–76
     [Google Scholar]
  53. Gilberthorpe E, Papyrakis E. 2015. The extractive industries and development: the resource curse at the micro, meso and macro levels. Extr. Ind. Soc. 2:2381–90
     [Google Scholar]
  54. Goderis B, Malone SW. 2011. Natural resource booms and inequality: theory and evidence. Scand. J. Econ. 113:2388–417
     [Google Scholar]
  55. Gylfason T. 2001. Natural resources, education, and economic development. Eur. Econ. Rev. 45:4–6847–59
     [Google Scholar]
  56. Gylfason T, Zoega G 2003. Inequality and economic growth: Do natural resources matter?. Inequality and Growth TS Eicher, SJ Turnovsky 255–92 Cambridge, MA: MIT Press
     [Google Scholar]
  57. Haber S, Menaldo V. 2011. Do natural resources fuel authoritarianism? A reappraisal of the resource curse. Am. Political Sci. Rev. 105:11–26
     [Google Scholar]
  58. Harris AS, Sigman R, Meyer-Sahling J-H, Mikkelsen KS, Schuster C. 2020. Oiling the bureaucracy? Political spending, bureaucrats and the resource curse. World Dev 127:3104745
     [Google Scholar]
  59. Herb M. 2005. No representation without taxation? Rents, development, and democracy. Comp. Politics 37:3297–316
     [Google Scholar]
  60. Hirschman AO. 1958. The Strategy of Economic Development New Haven, CT: Yale Univ. Press
  61. Hirschman AO 1981. A generalized linkage approach to development, with special references to staples. Essays in Trespassing: Economics to Politics and Beyond AO Hirschman pp. 59–97 Cambridge, UK: Cambridge Univ. Press
     [Google Scholar]
  62. Isham J, Woolcock M, Pritchett L, Busby G. 2005. The varieties of resource experience: natural resource export structures and the political economy of economic growth. World Bank Econ. Rev. 19:2141–74
     [Google Scholar]
  63. James A. 2017. Natural resources and education outcomes in the United States. Resour. Energy Econ. 49:150–64
     [Google Scholar]
  64. Jensen N, Wantchekon L. 2004. Resource wealth and political regimes in Africa. Comp. Political Stud. 37:7816–41
     [Google Scholar]
  65. Karl TL. 2004. Oil-led development: social, political, and economic consequences. Encycl. Energy 4:661–72
     [Google Scholar]
  66. Kotsadam A, Tolonen A. 2016. African mining, gender and local employment. World Dev 83:325–39
     [Google Scholar]
  67. Kurtz MJ, Brooks SM. 2011. Conditioning the “resource curse”: globalization, human capital, and growth in oil-rich nations. Comp. Political Stud. 44:6747–70
     [Google Scholar]
  68. Loayza N, Raddatz C. 2010. The composition of growth matters for poverty alleviation. J. Dev. Econ. 93:1137–51
     [Google Scholar]
  69. Loayza N, Rigolini J. 2016. The local impact of mining on poverty and inequality: evidence from the commodity boom in Peru. World Dev 84:219–34
     [Google Scholar]
  70. Lewis PM. 2007. Growing Apart: Oil, Politics, and Economic Change in Indonesia and Nigeria Ann Arbor: Univ. Mich. Press
  71. Mamo N, Bhattacharyya S, Moradi A. 2019. Intensive and extensive margins of mining and development: evidence from sub-Saharan Africa. J. Dev. Econ. 139:28–49
     [Google Scholar]
  72. Masi T, Ricciuti R. 2019. The heterogeneous effect of oil discoveries on democracy. Econ. Politics 31:3374–402
     [Google Scholar]
  73. Masi T, Savoia A, Sen K. 2020. Is there a fiscal resource curse? Resource rents, fiscal capacity, and political institutions in developing economies WIDER Work. Pap. 10/2020 UNU-WIDER Helsinki: https://doi.org/10.35188/UNU-WIDER/2020/767-5
    [Crossref]
  74. Mehlum H, Moene K, Torvik R. 2006. Institutions and the resource curse. Econ. J. 116:5081–20
     [Google Scholar]
  75. Mejía LB. 2020. Mining and human capital accumulation: evidence from the Colombian gold rush. J. Dev. Econ. 145:102471
     [Google Scholar]
  76. Michaels G. 2011. The long term consequences of resource-based specialisation. Econ. J. 121:55131–57
     [Google Scholar]
  77. Norman CS. 2009. Rule of law and the resource curse: abundance versus intensity. Environ. Resour. Econ. 43:183
     [Google Scholar]
  78. Omgba LD. 2015. Why do some oil-producing countries succeed in democracy while others fail?. World Dev 76:180–89
     [Google Scholar]
  79. Parcero OJ, Papyrakis E. 2016. Income inequality and the oil resource curse. Resour. Energy Econ. 45:159–77
     [Google Scholar]
  80. Rau T, Urzúa S, Reyes L 2015. Early exposure to hazardous waste and academic achievement: evidence from a case of environmental negligence. J. Assoc. Environ. Resour. Econ. 2:4527–63
     [Google Scholar]
  81. Ricciuti R, Savoia A, Sen K. 2019a. How do political institutions affect fiscal capacity? Explaining taxation in developing economies. J. Inst. Econ. 15:2351–80
     [Google Scholar]
  82. Ricciuti R, Savoia A, Sen K. 2019b. What determines administrative capacity in developing countries?. Int. Tax Public Finance 26:972–98
     [Google Scholar]
  83. Robinson JA, Torvik R, Verdier T. 2006. Political foundations of the resource curse. J. Dev. Econ. 79:2447–68
     [Google Scholar]
  84. Rodney W. 1972. How Europe Underdeveloped Africa London: Bogle-L'Ouverture Publ.
  85. Ross ML 2007. How mineral-rich states can reduce inequality. Escaping the Resource Curse M Humphreys, JD Sachs, JE Stiglitz 237–55 New York: Columbia Univ. Press
     [Google Scholar]
  86. Ross ML. 2008. Oil, Islam and women. Am. Political Sci. Rev. 102:1107–23
     [Google Scholar]
  87. Ross ML. 2015. What have we learned about the resource curse?. Annu. Rev. Political Sci. 18:239–59
     [Google Scholar]
  88. Sokoloff KL, Engerman SL. 2000. Institutions, factor endowments, and paths of development in the New World. J. Econ. Perspect. 14:3217–32
     [Google Scholar]
  89. Stijns JP. 2006. Natural resource abundance and human capital accumulation. World Dev 34:61060–83
     [Google Scholar]
  90. Tornell A, Lane PR. 1999. The voracity effect. Am. Econ. Rev. 89:122–46
     [Google Scholar]
  91. Torvik R. 2002. Natural resources, rent seeking and welfare. J. Dev. Econ. 67:2455–70
     [Google Scholar]
  92. UNDP (UN Dev. Prog.) 2020. Human development data center UN Dev. Prog. New York: accessed July 5, 2020. http://hdr.undp.org/en/data
  93. Vahabi M. 2018. The resource curse literature as seen through the appropriability lens: a critical survey. Public Choice 175:3393–428
     [Google Scholar]
  94. van der Ploeg F. 2011. Natural resources: Curse or blessing?. J. Econ. Lit. 49:2366–420
     [Google Scholar]
  95. van der Ploeg F, Poelhekke S. 2009. Volatility and the natural resource curse. Oxf. Econ. Pap. 61:4727–60
     [Google Scholar]
  96. van der Ploeg F, Poelhekke S. 2017. The impact of natural resources: survey of recent quantitative evidence. J. Dev. Stud. 53:2205–16
     [Google Scholar]
  97. Venables AJ. 2016. Using natural resources for development: Why has it proven so difficult?. J. Econ. Perspect. 30:1161–84
     [Google Scholar]
  98. Vicente PC. 2010. Does oil corrupt? Evidence from a natural experiment in West Africa. J. Dev. Econ. 92:128–38
     [Google Scholar]
  99. Von der Goltz J, Barnwal P 2019. Mines: the local wealth and health effects of mineral mining in developing countries. J. Dev. Econ. 139:1–16
     [Google Scholar]
  100. World Bank 2020. World development indicators World Bank Washington, DC: updated Feb. 17, 2021, accessed July 2020. http://data.worldbank.org/data-catalog/world-development-indicators
  101. Zabsonré A, Agbo M, Somé J. 2018. Gold exploitation and socioeconomic outcomes: the case of Burkina Faso. World Dev 109:206–21
     [Google Scholar]
/content/journals/10.1146/annurev-resource-100820-092612
Loading
The Political Economy of the Resource Curse: A Development Perspective
Annual Review of Resource Economics 13, 203 (2021); https://doi.org/10.1146/annurev-resource-100820-092612
/content/journals/10.1146/annurev-resource-100820-092612
/content/journals/10.1146/annurev-resource-100820-092612
Loading

Data & Media loading...

Supplemental Material

Supplementary Data

  • Article Type: Review Article

Most Cited Most Cited RSS feed

This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error