Resource Curse or Not: A Question of Appropriability*

Whether natural resources are good or bad for a country's development are shown to depend on the interaction between institutional setting and, crucially, the types of resources possessed by the country. Some natural resources are, for economical and technical reasons, more likely to cause problems such as rent‐seeking and conflicts than others. This potential problem can, however, be countered by good institutional quality. In contrast to the traditional resource curse hypothesis, we show the impact of natural resources on economic growth to be non‐monotonic in institutional quality, and increasingly so for certain types of resources. In particular, countries rich in minerals are cursed only if they have low‐quality institutions, while the curse is reversed if institutions are sufficiently good. Furthermore, if countries are rich in diamonds and precious metals, these effects—both positive and negative—are larger.     

Transmission channels of the resource curse in Africa: A time perspective

Most sub-Saharan African countries share the following characteristics: a strong dependence on natural resources, weak institutions, and relatively low growth levels preventing them to catch up with the rest of the developing world. This paper aims to unfold the natural resource curse by introducing a time perspective: long-term versus short-term effects. Following the two-step Engle and Granger procedure, an error-correction model is performed after a cointegration estimation. In addition, the paper clusters the countries to differentiate the natural resource curse mechanisms by level of institutional quality. Results are three-fold. On the long run, the negative impact of the dependence is confirmed for all categories. Countries with weak institutions are more vulnerable to the curse because the resource dependence not only negatively impacts long-term growth but also adversely impacts the recovery process. Finally, in a strong institutional environment, results point towards a potential positive impact of natural resources during recovery process.     

Do Natural Resources Depress Income Per Capita?

Most evidence for the resource curse comes from cross‐country growth regressions suffers from bias originating from the high and ever‐evolving volatility in commodity prices. These issues are addressed by providing new cross‐country empirical evidence for the effect of resources in income per capita. Natural resource dependence (resource exports) has a significant negative effect on income per capita, especially in countries with bad rule of law or bad policies, but these results weaken substantially once we allow for endogeneity. However, the more exogenous measure of resource abundance (stock of natural capital) has a significant negative effect on income per capita even after controlling for geography, rule of law and de facto or de jure trade openness. Furthermore, this effect is more severe for countries that have little de jure trade openness. These results are robust to using alternative measures of institutional quality (expropriation and corruption instead of rule of law).     

Manufacturing Skill‐biased Wage Inequality,Natural Resources and Institutions

We use an extensive dataset on occupational wages to measure the manufacturing skill premium and assess, for the first time, the influence of natural resources and institutional quality—in addition to traditional drivers—for advanced and less‐advanced countries and the full sample. The new findings, regarding 21 countries between 1988 and 2008 in the main panel estimations, suggest the premium of advanced countries rises with tertiary enrollment, net foreign direct investment (FDI) and institutional quality, and falls with centralized wage negotiations and geographically diffuse natural resource activities, mainly re‐exportation related. In less‐advanced countries, the premium rises with net FDI, scale effects, centralized wage negotiations and geographically concentrated natural resource activities (absorbing scarce skilled workers), and falls with trade, diffuse natural resource exploration (using mainly unskilled workers) and high‐technology exports, as emerging national low‐end technology industrial exporters may lower skill pay compared with foreign industrial exporters. In the full sample, the premium rises with scale effects, trade, institutional quality and concentrated natural resources, and falls with the relative skilled‐labor supply, centralized wage negotiations and diffuse natural resources. The results account for a wider diversity of situations compared with the previous studies.     

Sovereign rents and quality of tax policy and administration

Windfall revenues from foreign aid or natural resource exports can weaken governments’ incentives to design or maintain efficient tax systems. Cross-country data for developing countries provide evidence for this hypothesis, using a World Bank indicator on “efficiency of revenue mobilization.” Aid’s negative effects on quality of tax systems are robust to correcting for potential reverse causality, to changes in the sample, and to alternative estimation methods. Revenues from natural resources are also associated with lower-quality tax systems, but results are somewhat sensitive to the choice of resource dependence indicators, and to a few extreme values in the data. Disaggregating by resource type, revenues from fuel exports are found to be more strongly associated than revenues from metals and ores exports with inefficient tax systems.     

Resource Curse: New Evidence on the Role of Institutions

This paper attempts to provide a probable answer to a longstanding resource curse puzzle; i.e., why resource-rich nations grow at a slower rate compared with less fortunate ones. Using an innovative threshold estimation technique, the empirical results reveal that there is a threshold effect in the natural resources–economic growth relationship. We find that the impact of natural resources is meaningful to economic growth only after a certain threshold point of institutional quality has been attained. The results also shed light on the fact that the nations that have low institutional quality depend heavily on natural resources while countries with high quality institutions are relatively less dependent on natural resources to generate growth.     

Regime types,ideological leanings,and the natural resource curse

While many consider institutional quality as a central explanatory variable when finding what causes the variance in per capita GDP growth performance of resource-abundant countries, this paper attempts to focus on more structural factors: regime type and its ideological approaches to economic policy. Several joint effects of natural resource abundance and regime type on growth are found. The natural resource curse is likely to be more severe in authoritarian regimes than democratic regimes. Among democracies, it is found that the natural resource curse is more salient in presidential regimes than in parliamentary regimes. This paper also suggests that the natural resource curse is more likely when a certain type of democratic regime coincides with a particular ideological orientation of the regime with respect to economic policy. Presidential democracies with left-wing economic policy are found to be least growth enhancing among the combinations between regime type and its economic ideology offered, given similar levels of natural resource abundance.     

Natural resources, capital accumulation and the resource curse

Early concern by economists for the effect of natural capital on economic growth gave way to complacency and neglect during the nineteenth century. Evidence has emerged, however, that since the 1960s the economic performance of low-income countries has been inversely related to their natural resource wealth. This relationship is not a deterministic one so policy counts. SEEA can help improve the policy and performance of resource-abundant low-income countries by reinforcing the rationale for the sound management of natural resources and also by providing an index of policy sustainability in the form of the net saving rate. This policy index, along with other measures such as a capital fund for sterilizing the rent, initiatives to increase the transparency of rent flows and the rigorous evaluation of alternative uses of additional public sector revenue can improve the efficiency by which natural resource rent is transformed into alternative forms of capital to sustain rising social welfare. Chad and Mauritania provide case studies to illustrate how SEEA and net saving can be used to diagnose policy failure and improve economic performance.     

Export Product Diversification and Public Revenue’s Dependence on Resource Revenue

ABSTRACT

This article tries to reconcile two major priorities for countries, notably resource-rich countries on the international development agenda: export product diversification with a view to helping them better integrate into the multilateral trading system and tax reforms with a view to reducing the dependence of total public revenue on resource revenue, and therefore developing a more sustainable stream of public revenue. The analysis therefore involves examining empirically the impact of export product diversification on countries’ overall public revenue dependence on resource revenue, this dependence being measured by the share of resource revenue in total public revenue. The empirical analysis shows that export product diversification exerts a negative and significant impact on resource revenue share of total public revenue, and therefore could help facilitate tax reforms towards lower resource revenue dependence. Hence, while tax policy is the main policy tool to conduct tax reforms, export product diversification would likely contribute to facilitating the implementation of these reforms.     

Resource abundance and regional development in China1

Over the past several decades, China has made tremendous progress in market integration and infrastructure development. Demand for natural resources has increased from the booming coastal economies, causing the terms of trade to favour the resource sector, which is predominantly based in the interior regions of the country. However, the gap in economic development level between the coastal and inland regions has widened significantly. In this paper, using a panel dataset at the provincial level, we show that Chinese provinces with abundant resources perform worse than their resource‐poor counterparts in terms of per capita consumption growth. This trend that resource‐poor areas are better off than resource‐rich areas is particularly prominent in rural areas. Because of the institutional arrangements regarding property rights of natural resources, most gains from the resource boom have been captured either by the government‐ or state‐owned enterprises. Thus, the windfall of natural resources has more to do with government consumption than household consumption. Moreover, in resource‐rich areas, greater revenues accrued from natural resources bid up the price of non‐tradable goods and hurt the competitiveness of the local economy.     

“资源诅咒”悖论国外实证研究的最新进展及其争论

许多文献证明,自然资源缺乏的国家往往依靠技术和制度创新,实现了更快的经济增长,而自然资源丰裕的国家却容易陷入资源依赖型增长陷阱,经济学家用资源诅咒来描述这一经济增长中的悖论。资源诅咒的出现激起了学者们的广泛研究兴趣,产生了大量实证研究成果。本文将从荷兰病、制度和暴力冲突三个维度,对资源诅咒的国外最新实证文献进行系统梳理,并对目前学术界存在的争论进行述评。     

Canada’s dependence on natural capital wealth: Was Innis wrong?

Canada has abundant natural resources—its stock of natural capital wealth. A recurring debate in the literature is whether resource rich countries benefit in the form of higher sustained growth rates or not from the export of their natural resources. Canada's Harold Innis wrote extensively on this subject over 80 years ago and argued for the “no” side in the debate. Was he was right or wrong? I begin with the foundations of natural resource theory then turn to empirical work in recent decades. I agree with the literature that Canada overall has benefited from the export of its natural resources, but question whether that can continue given the focus on short term growth and the failure to account for the social costs of resource extraction and use—the environmental externalities that degrade and reduce stocks of natural capital. These externalities increasingly threaten our water and land resources and without more effective policy, the ability of resources to sustain growth and well‐being is questionable. Was Innis wrong? Yes in that the evidence supports the counter argument—resources have helped Canada become a developed economy with relatively high incomes and sustained growth rates. Innis was right that the uneven distribution of resources causes different impacts regionally especially during booms and busts and recognized the need to find substitutes for declining and degrading resource stocks. But Innis, like many after him, focused more on the intrinsic features of natural resources than policy to address the social costs of their development, a legacy that leaves us in a precarious position today.     

Do natural resources help or hinder development? Resource abundance,dependence, and the role of institutions

The resource curse literature presents conflicting evidence on the relationship between natural resources and development. We evaluate the direct effect of resources on developmental outcomes vis-à-vis their indirect effect through the weakening of political institutions using a 3SLS instrumental variable setup that simultaneously estimates development outcomes and institutions. We find that resource abundance and resource dependence affect development outcomes through different channels. While resource abundance generally has a direct positive effect on developmental outcomes, resource dependence has a stronger negative indirect effect that operates through its negative impact on institutional quality. The results also depend on the type of development outcome considered, with more consistent positive direct effects found for physical capital measures and stronger negative indirect effects for human capital development. The use of a simultaneous framework and dual measures of resources reconciles seemingly contradictory findings in earlier work.     

The curse of natural resources in the transition economies*

The curse of natural resources is a well‐documented phenomenon for developing countries. Economies that are richly endowed with natural resources tend to grow slowly. Among the transition economies of the former ‘Eastern Bloc’, a similar pattern can be observed. This paper shows that a large part of the variation in growth rates among the transition economies can be attributed to the curse of natural resources. After controlling for numerous other factors, there is still a strong negative correlation between natural resource abundance and economic growth. Among the transition economies the prime reasons for the curse of natural resources were corruption and a neglect of basic education. In order to overcome the curse of natural resources and move to a sustainable path of development, the resource abundant transition countries should fight corruption and ensure that their resource revenues are invested in human capital or the preservation of natural capital.     

Constitutions and the resource curse

Utilizing the fact that natural resources are randomly distributed among countries, we investigate how public income shocks have different long run economic effects dependent on constitutional arrangements. We find that (i) the so-called ‘resource curse’ is present in democratic presidential countries—but not in democratic parliamentary countries, (ii) being parliamentary or presidential matters more for the growth effects of natural resources than being democratic or autocratic, and (iii) natural resources are more likely to reduce growth when proportional electoral systems are in place than when the electoral systems are majoritarian. The two first effects appear very robust, the last effect less so.     

China's Economic Influence in Latin America

After decades of low‐level commercial interaction, China and Latin America significantly ramped up their economic relationship in the 2000s. China has jumped to first place as an export destination for many countries, and it is a major source of imports for all countries in the Latin America/Caribbean region. While not a major source of foreign direct investment overall, China has built a strong investment presence in certain countries, particularly in the natural resource and infrastructure sectors. China's influence in Latin America has presented a great opportunity for many countries, but it has also brought new risks. Three main challenges face the region: how to mitigate the impacts of increased commodity concentration as a result of China's strong demand for natural resources; how to avoid other natural resource curse effects; and how to manage the tapering of this growth. Latin American countries' relationships with China vary widely, so there is no single, coordinated regional response.     

Privatizations around the world: economic or political determinants?

The article examines economic, political, and institutional determinants of privatization using a panel of 50 countries over the period of 1988–2006. Our sample includes developed, developing, and transition economies. Privatization activity is measured by the number of privatization deals as well as the revenue raised and analyzed using the negative binomial regression and Tobit regression respectively. Although more privatization activity is usually taking place in countries displaying satisfactory economic performance in some respect, the role of economic factors turns out to be limited. The results identify a number of political and institutional determinants but some effects are specific to a particular type of economy. For example, in developing countries, right‐wing governments are associated with privatizations while new, not necessarily right‐wing governments, are behind privatization in Eastern Europe. The role of financial development is also varied, with sound financial institutions related to successful privatization in developed and developing countries but not in transition economies.     

Resource‐driven victory

The vast popularity of distributive policies in many resource‐rich countries coincided with the oil and gas price hike of 2004. However, following the sharp decline of price in the late 2014, this popularity started waning and the tendency toward more productive policies gained traction. Using a theoretical model, this paper studies the optimal composition of public spending and demonstrates that, for a sufficiently low amount of any exogenous revenue, for example, resource revenue, investing revenue in productive public good is preferable. The representative agent prefers more distributive policies as resource revenue increases. A key determinant of the optimal composition of public spending is the inherited level of productivity. Countries with too low or too high productivity both find distributive policies more appealing even for a small amount of resource revenue. Yet, they have an essential difference. Resource revenue eradicates individuals' incentive to work in countries with low initial productivity while individuals always prefer to work in highly productive countries.     

China's Outward Foreign Direct Investment:The Role of Natural Resources and Technology

Using the data of China's OFDI in more than 150 host countries or regions for the period of 1991-2009, in this paper we examine the underlying motivations and locational determinants of China's OFDI, with a focus on the role of natural resources and technology. Our findings indicate that the host country's natural resource abundance, interacted with its institutional quality, is a crucial determinant of China's OFDI. There is strong evidence that in the recent period of 2003-2009, the host country's overall natural resource abundance, oil abundance and metal abundance had a sizable positive effect on China's OFDI. In particular, China's OFDI was driven to resource-abundant countries with poor institutional quality and governance, and this pattern was strongest for oil but not metal resources. However, we find little evidence supporting the resourceseeking motivation in the pre-2003 period. Furthermore, we find strong evidence for the technology-exploiting motivation but not for the technology-seeking hypothesis. We show that, when the host is a lowincome country, China's OFDI increases if the host country's technology is more backward, indicating that Chinese investors might be taking advantage of their technology gap relative to the local firms.     

Constitutions and the resource curse

Utilizing the fact that natural resources are randomly distributed among countries, we investigate how public income shocks have different long run economic effects dependent on constitutional arrangements. We find that (i) the so-called ‘resource curse’ is present in democratic presidential countries—but not in democratic parliamentary countries, (ii) being parliamentary or presidential matters more for the growth effects of natural resources than being democratic or autocratic, and (iii) natural resources are more likely to reduce growth when proportional electoral systems are in place than when the electoral systems are majoritarian. The two first effects appear very robust, the last effect less so.