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The Natural Resource Curse: A Survey

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  • Jeffrey A. Frankel

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 has been borne out in some econometric tests of the determinants of economic performance across a comprehensive sample of countries. This 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. Skeptics have questioned the Natural Resource Curse, pointing to examples of commodity-exporting countries that have done well and arguing that resource endowments and booms are not exogenous. The paper concludes with a consideration of institutions and policies that some commodity-producers have tried, in efforts to overcome the pitfalls of the Curse. Ideas 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15836.

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Date of creation: Mar 2010
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Handle: RePEc:nbr:nberwo:15836

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  1. Andrew K. Rose & Mark M. Spiegel, 2008. "International Financial Remoteness and Macroeconomic Volatility," NBER Working Papers 14336, National Bureau of Economic Research, Inc.
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  8. Enrique G. Mendoza & P. Marcelo Oviedo, 2006. "Fiscal Policy and Macroeconomic Uncertainty in Developing Countries: The Tale of the Tormented Insurer," NBER Working Papers 12586, National Bureau of Economic Research, Inc.
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  17. 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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Blog mentions

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. 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).
  2. Egil Matsen, Gisle J. Natvik and Ragnar Torvik, 2012. "Petro populism," Working Paper Series 12812, Department of Economics, Norwegian University of Science and Technology.
  3. Jeffrey A. Frankel, 2011. "A Solution to Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," NBER Working Papers 16945, National Bureau of Economic Research, Inc.
  4. Graham Davis, 2011. "The resource drag," International Economics and Economic Policy, Springer, vol. 8(2), pages 155-176, June.
  5. 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.
  6. 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).
  7. 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.
  8. Larrú, José María, 2010. "Foreign Aid in Equatorial Guinea: Macroeconomic Features and Future Challenges," MPRA Paper 25001, University Library of Munich, Germany.
  9. 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.

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