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)