IDEAS home Printed from
   My bibliography  Save this paper

Is the “curse of natural resources” really a curse?


  • Pietro F. Peretto


This paper takes a new look at the long-run implications of resource abundance. Using a Schumpeterian growth model that yields an analytical solution for the transition path, it derives conditions under which the curse of natural resources occurs and is in fact a curse, meaning that welfare falls, conditions under which it occurs but it is not a curse, meaning that growth slows down but welfare rises nevertheless, and conditions under which it does not occur at all. An effective way to summarize the results is to picture growth and welfare as hump-shaped functions of resource abundance. The property that the peak of growth occurs earlier than the peak of welfare captures the crucial role of initial consumption, which rises with resource abundance, and is an important reminder that the welfare effect of resource abundance depends on the whole path of consumption, not on a summary statistic of its slope. Growth regressions that ignore the endogeneity of initial income do not provide sufficient information to assess whether resource abundance is bad even if one could prove beyond reasonable doubt that the relation is indeed negative and causal. Recent evidence that the correlation is actually positive should make us even more skeptical of policy advice based on the curse logic.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Pietro F. Peretto, 2009. "Is the “curse of natural resources” really a curse?," Levine's Working Paper Archive 814577000000000164, David K. Levine.
  • Handle: RePEc:cla:levarc:814577000000000164

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-531, May.
    2. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    3. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    4. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
    5. Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
    6. Nancy L. Stokey, 1981. "Rational Expectations and Durable Goods Pricing," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 112-128, Spring.
    7. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
    8. Sobel, Joel, 1991. "Durable Goods Monopoly with Entry of New Consumers," Econometrica, Econometric Society, vol. 59(5), pages 1455-1485, September.
    9. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    10. von der Fehr, Nils-Henrik Morch & Kuhn, Kai-Uwe, 1995. "Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 785-812, August.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pietro Peretto & Simone Valente, 2015. "Growth on a finite planet: resources, technology and population in the long run," Journal of Economic Growth, Springer, vol. 20(3), pages 305-331, September.
    2. Karen Pittel & Lucas Bretschger, 2010. "The implications of heterogeneous resource intensities on technical change and growth," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1173-1197, November.
    3. Madsen, Jakob B., 2010. "The anatomy of growth in the OECD since 1870," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 753-767, September.
    4. Lopez, Ramon E. & Stocking, Andrew, 2009. "Bringing Growth Theory "Down to Earth"," Working Papers 48944, University of Maryland, Department of Agricultural and Resource Economics.
    5. William F. Maloney & Daniel Lederman, 2008. "In search of the Missing Resource Curse," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2008), pages 1-57, August.

    More about this item

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cla:levarc:814577000000000164. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.