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What Can We Learn about the "Resource Curse" from Foreign Aid?

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  • Kevin M. Morrison

Abstract

A large body of literature has arisen in economics and political science analyzing the apparent "resource curse"--the tendency of countries with high levels of natural resources to exhibit worse economic and political outcomes. The author examines the purported causal mechanisms underlying this "curse" and shows that they all center on the revenue that these resources generate for the government. As such, it is not surprising that the most recent literature on the topic has demonstrated that, in the hands of a competent government, natural resources have no negative consequences and may actually have positive effects. The important question therefore is: What can be done in countries without effective governments? Policy proposals have centered on (a) taking the resources out of the hands of the government or (b) having the government commit to use the funds in certain ways. Neither of these has been particularly successful, which we might have predicted from research on another important nontax revenue source for developing countries: foreign aid. The close parallels between the foreign aid and "resource curse" literatures are reviewed, as are the lessons from the aid literature. These lessons suggest the need for an important change in approach toward poorly governed resource-rich countries. Copyright 2012, Oxford University Press.

Suggested Citation

  • Kevin M. Morrison, 2012. "What Can We Learn about the "Resource Curse" from Foreign Aid?," World Bank Research Observer, World Bank Group, vol. 27(1), pages 52-73, February.
  • Handle: RePEc:oup:wbrobs:v:27:y:2012:i:1:p:52-73
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    File URL: http://hdl.handle.net/10.1093/wbro/lkq013
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    1. repec:eee:jrpoli:v:55:y:2018:i:c:p:80-86 is not listed on IDEAS
    2. Isaksson, Ann-Sofie & Kotsadam, Andreas, 2018. "Chinese aid and local corruption," Journal of Public Economics, Elsevier, vol. 159(C), pages 146-159.
    3. Fuchs, Andreas & Dreher, Axel & Hodler, Roland & Parks, Bradley C. & Raschky, Paul, 2015. "Aid on Demand: African Leaders and the Geography of China s Foreign Assistance," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112838, Verein für Socialpolitik / German Economic Association.
    4. Dina Azhgaliyeva, 2013. "What Makes Oil Revenue Funds Effective," International Conference on Energy, Regional Integration and Socio-economic Development 6023, EcoMod.
    5. Helen V. Milner & Daniel L. Nielson & Michael G. Findley, 2016. "Citizen preferences and public goods: comparing preferences for foreign aid and government programs in Uganda," The Review of International Organizations, Springer, vol. 11(2), pages 219-245, June.
    6. Ehizuelen Michael Mitchell Omoruyi, 2016. "The Dragon's Goodwill: Examining China's External Finance and African Leaders' Preferentialism," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-30, October.
    7. Dobronogov, Anton & Keutiben, Octave, 2014. "Containing volatility : windfall revenues for resource-rich low-income countries," Policy Research Working Paper Series 6956, The World Bank.
    8. Briggs, Ryan C., 2014. "Aiding and Abetting: Project Aid and Ethnic Politics in Kenya," World Development, Elsevier, vol. 64(C), pages 194-205.

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