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Understanding the resource curse (or blessing) across national and regional scales: Theory, empirical challenges and an application

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  • Fleming, David A.
  • Measham, Thomas G.
  • Paredes, Dusan

Abstract

The relationship between resource extraction activity and economic growth has been widely studied in the literature, and the resource curse hypotheses emerged as a theory to explain the effects of resource windfalls on national economies. However, within countries, resource booms and busts can have distinctive effects across local economies, as extractive regions face particular economic consequences unlikely to be observed in nonresource regions. Empirically, most studies analysing the resource curse have relied on cross-country models to estimate effects and inform policy; however, the use of regional – within-country – analysis has gained attention from scholars lately, promoted by two advantages: it avoids unobserved country heterogeneities confounding economic outcomes caused by resources and exploits the subnational quasi-natural experimental conditions generated by endowments. This paper contributes to the resource curse literature by discussing its theoretical causes across scale (regional vs. national effects) and highlighting the empirical challenges involved in the analysis of mining economic impacts across regions. We complement the discussions by econometrically modelling economic growth across nonmetropolitan substate regions of Australia during a period of resource windfalls, finding that in most cases, resources have been a blessing for local economies, although negative effects have also been experienced in parts of the country.

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  • Fleming, David A. & Measham, Thomas G. & Paredes, Dusan, 2015. "Understanding the resource curse (or blessing) across national and regional scales: Theory, empirical challenges and an application," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), October.
  • Handle: RePEc:ags:aareaj:283221
    DOI: 10.22004/ag.econ.283221
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    3. Mohammad Reza Farzanegan & Marcel Thum, 2017. "Oil Dependency and Quality of Education: New Empirical Evidence," MAGKS Papers on Economics 201745, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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    11. Hayat, Arshad & Tahir, Muhammad, 2019. "Natural resources volatility and economic growth: evidence from the resource-rich region," MPRA Paper 92293, University Library of Munich, Germany.
    12. Ryan D. Bergstrom & Afton Clarke-Sather, 2020. "Balancing Socio-Ecological Risks, Politics, and Identity: Sustainability in Minnesota’s Copper-Nickel-Precious Metal Mining Debate," Sustainability, MDPI, Open Access Journal, vol. 12(24), pages 1-1, December.
    13. Fleming, David & Komarek, Timothy & Partridge, Mark & Measham, Thomas, 2015. "The Booming Socioeconomic Impacts of Shale: A Review of Findings and Methods in the Empirical Literature," MPRA Paper 68487, University Library of Munich, Germany.
    14. Anser, Muhammad Khalid & Yousaf, Zahid & Nassani, Abdelmohsen A. & Vo, Xuan Vinh & Zaman, Khalid, 2020. "Evaluating ‘natural resource curse’ hypothesis under sustainable information technologies: A case study of Saudi Arabia," Resources Policy, Elsevier, vol. 68(C).
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    18. Parker, Rachel & Cox, Stephen, 2018. "How the globalisation and financialisation of mining Majors affects linkage development with local engineering and technology suppliers in the Queensland resources industry," Resources Policy, Elsevier, vol. 58(C), pages 125-130.
    19. Galina Williams & Ruth Nikijuluw, 2020. "The economic and social benefit of coal mining: the case study of regional Queensland," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1113-1132, October.
    20. Valle de Souza, Simone & Dollery, Brian & Blackwell, Boyd, 2018. "An empirical analysis of mining costs and mining royalties in Queensland local government," Energy Economics, Elsevier, vol. 74(C), pages 656-662.
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    22. Atienza, Miguel & Modrego, Félix, 2019. "The spatially asymmetric evolution of mining services suppliers during the expansion and contraction phases of the copper super-cycle in Chile," Resources Policy, Elsevier, vol. 61(C), pages 77-87.
    23. Evans, Neil & Jones, Calvin & Munday, Max & Song, Meng, 2019. "Economic effects in the UK periphery from unconventional gas development: Evidence from Wales," Energy, Elsevier, vol. 166(C), pages 1037-1046.

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