Is the “Natural Resource Curse” Not Quite True?

Photo: John Foxx

Accepted wisdom generally holds that the presence of natural resources in a developing country is bad news, a so-called “natural resource curse.” This view began to emerge in the 1980s, and gained popularity in the mid-1990s with the publication of Jeffrey Sachs‘ and Andrew Warner‘s paper Natural Resource Abundance and Economic Growth, which argued that economies with a high ratio of natural resource exports to GDP tended to have low growth rates. One of the primary culprits cited by the resource curse theory is the economic phenomenon known as Dutch Disease, in which revenues from natural resource exports cause an increase in the real exchange rate and lead to domestic wage inflation, which in turn has a negative impact on the manufacturing sector of the resource-rich country. There is also the belief that abundant natural resources sparks political conflict and can lead to authoritarian regimes.

However, a new paper by Stephen Haber and Victor Menaldo disputes this maxim entirely. Citing data concerns with previous studies, the authors “develop unique historical datasets, employ time-series centric techniques, and operationalize explicitly specified counterfactuals.” Haber and Menaldo test to see if there is “a long-run relationship between resource reliance and regime type within countries over time, both on a country-by-country basis and across several different panels.”

Ultimately, they find that contrary to popular belief, “increases in resource reliance are not associated with authoritarianism.” And in fact, may in many specifications, “generate results that suggest a resource blessing.” (HT: Chris Blattman)

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  1. Alex says:

    Perhaps these curse theorists should look up American history.

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  2. Joshua Northey says:

    I never took that hypothesis seriously. You need to evaluate claims based both on the evidence provided and on the consistency of the claim with your existing knowledge base. The claim that having resources was a curse is so counter-intuitive I always wanted a lot more data than the rather spare set that was provided.

    I am certainly willing to hear out such a theory, and I would think resources probably don’t help as much as might be expected, but it would take a lot to convince me they are actively detrimental.

    It also might depend on who the subject is (the country as an entity, its citizens, its economy, et cetera).

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  3. Mike B says:

    It’s probably based on the type and distribution of resources instead of resources in general..

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  4. Andreas Moser says:

    The “resource curse” also explains why hot girls are dumb: http://andreasmoser.wordpress.com/2011/04/07/why-hot-girls-are-dumb/

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  5. Simon Buryan says:

    This a pretty streight forward short article, which tries to change the view of generally accepted theory, which was here for quite a while. For doing so you can´t just a put link of a single paper. For every view of the world you´ll find allways at leats some critical papers. What about the rest of the research, which is out there? And what is the most common view of the problem???

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