Natural
Resources: Curse
or Blessing?
Frederick van der Ploeg
Pereslytskikh Uliana M2 GLOWE
Sustainable
Natural resource
development
Important definitions
Hartwick rule
In resource economics, Hartwick's rule defines the
amount of investment in produced capital that is
needed to exactly offset declining stocks of
non-renewable resources. This investment is
undertaken so that the standard of living does not
fall as society moves into the indefinite future.
Rent seeking
Rent-seeking is the act of growing one's
existing wealth by manipulating the social or
political environment without creating new
wealth.
Some examples from history
Despite oil revenues per capita rising from $33 in 1965 to $325 in
2000, Nigeria's income per capita has stagnated at ~$1,100 (PPP)
Nigeria since independence, placing it among the world's 15 poorest
countries
The financial opportunities that coca provided have fueled violence
Colombia and civilian conflict especially outside the major cities
Has the second highest public expenditure on education as a
Botswana fraction of GNP, enjoys the world’s highest growth rate since 1965,
and its GDP per capita is at least ten times that of Nigeria
Its government debt is very small, inflation is low, and hydrocarbon
UAE wealth has been used to modernize infrastructure, create jobs, and
establish a generous welfare system.
Negative correlation between growth
performance and the share of natural
resources in exports
Dutch disease: natural resources windfall
causes deindustrialization
Dutch disease is an economic term
that refers to the negative
consequences that can arise when
a country discovers and rapidly
develops a valuable natural
resource, such as oil or minerals. It
describes the paradox where a
large increase in wealth from
resource exports can actually
harm a nation's broader economy.
Turning curse into a blessing: good
instructions and no corruption
Marginal Effects of Different Resources on
Growth for Varying Institutional Quality
Democracy and corruption
Natural resources curse Resource windfalls increase
stronger in presidential corruption, especially in
democracies non-democracies
Presidential systems are less Panel evidence of 99 countries
accountable and less representative 1980-2004: natural resources induce
than parliamentary and thus offer corruption only in countries that has had
more scope for recourse rent a non-democratic regime for more than
extraction. 60% of the years since 1950
Natural Resource Wealth Induces Voracious
Rent Seeking and Armed Conflict
More entrepreneurship switches to to rent
seeking in times of a resource boom
More rent seekers induce negative external effects that depress
profits from remaining entrepreneurs → stimulates more people to
shift from productive entrepreneurship
Increased civil war chances
A country with no resources has a probability of civil conflict of
merely 0.5 %, but a country with a share of natural resources in GDP
of a quarter has a probability of 23 %.
All resources put country at risk
Diamonds, oil and narcotics especially increase the risk of civil war
onsets. Lootable resources such as gemstones and drug tend to
prolong conflict but do not increase the chances of the onset of
conflict.
Genuine saving and the wealth of nations
Conclusions
Large share of primary exports in However, good institutions, trade
GNP leads to bad growth records openness, and high investments
and higher inequality in exploration technology let turn
this curse into blessing
Critical assessment
Paper covers most of the Wide range of examples
+ theories and economic
factors that are
+ and cross-country
analyses
connected to the
resource dependency
Disorganized paper that
High reliance on the
- jumps a lot from one
point to another within
- theoretical concepts and
other people research
logical part
Alternative Prescriptions for Harnessing Natural
Resource Windfalls
