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The Natural Resource Curse: A Survey

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  • Frankel, Jeffrey

    (Harvard University)

Abstract

It is striking how often countries with oil or other natural resource wealth have failed to grow more rapidly than those without. This is the phenomenon known as the Natural Resource Curse. The principle is not confined to individual anecdotes or case studies, but has been borne out in econometric tests of the determinants of economic performance across a comprehensive sample of countries. The paper considers six aspects of commodity wealth, each of interest in its own right, but each also a channel that some have suggested could lead to sub-standard economic performance. They are: long-term trends in world commodity prices, volatility, crowding out of manufacturing, civil war, poor institutions, and the Dutch Disease. The paper concludes with a consideration of promising ideas for institutions that could help a country that is rich in, say, oil overcome the pitfalls of the Curse and achieve good economic performance. They include indexation of oil contracts, hedging of export proceeds, denomination of debt in terms of oil, Chile-style fiscal rules, a monetary target that emphasizes product prices, transparent commodity funds, and lump-sum distribution.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp10-005.

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Date of creation: Feb 2010
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Handle: RePEc:ecl:harjfk:rwp10-005

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  1. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Frankel surveys the natural resource curse literature
    by Michael Giberson in knowledge problem on 2010-03-03 19:50:52
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Cited by:
  1. Massol, O. & Banal-Estanol, A., 2012. "Export diversification and resource-based industrialization: the case of natural gas," Working Papers 12/01, Department of Economics, City University London.
  2. BODART, Vincent & CANDELON, Bertrand & CARPANTIER, Jean - François, 2011. "Real exchanges rates in commodity producing countries : A reappraisal," CORE Discussion Papers 2011006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Larrú, José María, 2010. "Foreign Aid in Equatorial Guinea: Macroeconomic Features and Future Challenges," MPRA Paper 25001, University Library of Munich, Germany.
  4. Jeffrey Frankel, 2011. "A Solution to Fiscal Procyclicality: the Structural Budget Institutions Pioneered by Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 14(2), pages 39-78, August.
  5. Egil Matsen, Gisle J. Natvik and Ragnar Torvik, 2012. "Petro populism," Working Paper Series 12812, Department of Economics, Norwegian University of Science and Technology.
  6. Elissaios Papyrakis & Ohad Raveh, 2013. "An Empirical Analysis of a Regional Dutch Disease: The case of Canada," OxCarre Working Papers 106, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  7. Pedro Conceição & Ricardo Fuentes & Sebastian Levine, 2011. "Managing Natural Resources for Human Development in Low-Income Countries," Working Papers 2011-002, United Nations Development Programme, Regional Bureau for Africa (UNDP/RBA).
  8. Roberto Iacono, 2012. "Is it really worse with a Bird in Hand? A comparison of fiscal rules for resource-rich economies," Working Paper Series 12612, Department of Economics, Norwegian University of Science and Technology.
  9. Graham Davis, 2011. "The resource drag," International Economics and Economic Policy, Springer, vol. 8(2), pages 155-176, June.

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