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The Natural Resource Curse: A Survey

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  • Frankel, Jeffrey A.

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 Kennedy School of Government in its series Scholarly Articles with number 4454156.

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Date of creation: 2010
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Publication status: Published in HKS Faculty Research Working Paper Series
Handle: RePEc:hrv:hksfac:4454156

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  1. Hodler, Roland, 2006. "The curse of natural resources in fractionalized countries," European Economic Review, Elsevier, vol. 50(6), pages 1367-1386, August.
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  12. Rabah Arezki & Markus Bruckner, 2011. "Oil Rents, Corruption, and State Stability: Evidence from Panel Data Regressions," School of Economics Working Papers 2011-07, University of Adelaide, School of Economics.
  13. Atsushi Iimi, 2006. "Did Botswana Escape from the Resource Curse?," IMF Working Papers 06/138, International Monetary Fund.
  14. Catherine Norman, 2009. "Rule of Law and the Resource Curse: Abundance Versus Intensity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 183-207, June.
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  23. repec:fth:stanho:e-92-3 is not listed on IDEAS
  24. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
  25. Blattman, Christopher & Hwang, Jason & Williamson, Jeffrey G., 2007. "Winners and losers in the commodity lottery: The impact of terms of trade growth and volatility in the Periphery 1870-1939," Journal of Development Economics, Elsevier, vol. 82(1), pages 156-179, January.
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  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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