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The Resource Curse Revisited and Revised a Tale of Paradoxes JEEM 2008[1]

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Journal of Environmental Economics and Management 55 (2008) 248–264 The resource curse revisited and revised: A tale of paradoxes and red herrings Christa N. Brunnschweiler a, , Erwin H. Bulte b,c a CER-ETH Cente r of Economic Rese arch at ETH Zurich, Switzerland b Development Economics Group, Wageningen University, The Netherlands c Department of Economics, Tilburg University, The Netherlands Received 14 December 2006 Avail able online 16 Febr uary 2008 Abstract We critically 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. The most commonly used measure of ‘‘resource abundance’’ can be more usefully interpreted as a proxy for ‘‘resource dependence’’—endogenous to underlying str uct ural factors. In mul tiple est imat ions that combine resource abundance and depe ndence, instit uti onal, and consti tut ional variables, we find that (i) resource abundance, consti tut ions, and instit uti ons det ermine res ource dependence, (ii) resource dependence does not affect growth, and (iii) resource abundance positively affects growth and institutional quality. r 2008 Elsevier Inc. All rights reserved. JEL classification: O11; O13; Q0 Keywords: Natural resource curse; Economic growth; Growth regressions; Political regimes; Institutions; Constitutions 1. Introduction Inspired by work of Sachs and Warner  [48], a new literature has developed that focuses on the so-called ‘‘resource curse’’—the puzzling paradox suggesting that resource-rich countries tend to grow more slowly than resource-poor ones. Like most people, economists are fond of paradoxes. It is therefore not surprising that the curse has inspired many economists to consider its origins or test its robustness. Among the popular early explanations for the curse are ‘‘structuralist’’ theories with roots in the 1950s  [42], rent-seeking analyses (e.g. Ref. [52]), and stories based on Dutch-disease type of arguments, where the non-resource sector is the long-run engine of growth due to increasing returns at the sector level but becomes ‘‘crowded out’’ by the resource sector  [32]. 1 AR TICLE IN PRESS www.elsevier.com/locate/jeem 0095-0696/$- see front matter r 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.jeem.2007.08.004 Corresponding author. E-mail addresses:  [email protected] (C.N. Brunnschweiler),  [email protected] (E.H. Bulte). 1 See also Ref.  [55]  for a critical assessment of the claim that the resource sector is unlikely to yield spillover benefits.
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