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Journal of Economic Literature: Vol. 49 No. 2 (June 2011)

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Natural Resources: Curse or Blessing?

Article Citation

van der Ploeg, Frederick. 2011. "Natural Resources: Curse or Blessing?" Journal of Economic Literature, 49(2): 366-420.

DOI: 10.1257/jel.49.2.366

Abstract

Are natural resources a "curse" or a "blessing"? The empirical evidence suggests that either outcome is possible. This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization, and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in nondemocratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies. (JEL O47, Q32, Q33)

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Authors

van der Ploeg, Frederick (U Oxford and Free U Amsterdam)

JEL Classifications

O47: Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
Q32: Exhaustible Resources and Economic Development
Q33: Resource Booms


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