The Evolution of the Natural Resource Curse Thesis: A Critical Literature Survey

This paper surveys the literature of the natural resource curse hypothesis. We review the theoretical mechanisms through which natural resource wealth might slow economic growth, and then the empirical studies that test for an effect overall, or an effect on factors typically associated with economic growth. We also review more recent studies suggesting that the findings supporting the resource curse may reflect only empirical mis-specification. The literature has produced conflicting evidence, with no consensus on the net effect of natural resources in an economy. Overall we argue that evidence for a negative effect of natural resource dependence on economic growth remains convincing, particularly for developing economies and particularly working through factors closely associated with growth. We take recent contrarian studies to demonstrate, however, both that a resource curse is not inevitable, and that future studies should better address issues of endogeneity of dependence measures, years of study, and potential non-monotonic relationships.