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The Natural Resource Curse: A Survey of Diagnoses and Some Prescriptions

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  • Frankel, Jeffrey A.

    (Harvard University)

Abstract

Countries with oil, mineral or other natural resource wealth, on average, have failed to show better economic performance than those without, often because of undesirable side effects. This is the phenomenon known as the Natural Resource Curse. This paper reviews the literature, classified according to six channels of causation that have been proposed. The possible channels are: (i) long-term trends in world prices, (ii) price volatility, (iii) permanent crowding out of manufacturing, (iv) autocratic/oligarchic institutions, (v) anarchic institutions, and (vi) cyclical Dutch Disease. With the exception of the first channel--the long-term trend in commodity prices does not appear to be downward--each of the other channels is an important part of the phenomenon. Skeptics have questioned the Natural Resource Curse, pointing to examples of commodity-exporting countries that have done well and arguing that resource exports and booms are not exogenous. The relevant policy question for a country with natural resources is how to make the best of them.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp12-014.

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Date of creation: Apr 2012
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Handle: RePEc:ecl:harjfk:rwp12-014

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Cited by:
  1. Dobronogov, Anton & Keutiben, Octave, 2014. "Containing volatility : windfall revenues for resource-rich low-income countries," Policy Research Working Paper Series 6956, The World Bank.
  2. World Bank, 2012. "World Development Report 2013," World Bank Publications, The World Bank, number 11843.
  3. AREZKI Rabah & DUPUY Arnaud & GELB Alan, 2013. "Resource Windfalls, Optimal Public Investment and Redistribution: The Role of Total Factor Productivity and Administrative Capacity," CEPS/INSTEAD Working Paper Series 2013-12, CEPS/INSTEAD.

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