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Disaggregating the Resource Curse: Is the Curse More Difficult to Dispel in Oil States than in Mineral States?

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  • Timothy Azarchs
  • Tamar Khitarishvili

Abstract

The hypothesis of the natural resource curse has captivated the economics profession, and since the mid-1990s has generated a large body of policymaking initiatives aimed at dispelling the curse. In this paper, we evaluate how the effect of resource abundance on economic growth has changed since these policies were first introduced by comparing the periods 1970–89 and 1996–2008. We disaggregate resources into oil, gas, coal, and nonfuel mineral resources, and find that disaggregation unmasks diverse effects of resources on concurrent economic and institutional outcomes, as well as on the ability of countries to transform their economic and institutional infrastructure. We consider resource dependence and institutional quality as two channels linking resource abundance to economic growth in the context of an instrumental variables (IV) model. In addition to exploring these channels, the IV framework enables us to test for the endogeneity of the measures of resource dependence and institutional quality in the growth regressions, paying particular attention to the weakness of the instruments.

Suggested Citation

  • Timothy Azarchs & Tamar Khitarishvili, 2010. "Disaggregating the Resource Curse: Is the Curse More Difficult to Dispel in Oil States than in Mineral States?," Economics Working Paper Archive wp_641, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_641
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    Keywords

    Resource Curse; Resource Stocks; Resource Dependence; Rule of Law; Institutions; Economic Growth; Growth Regressions; Instrumental Variables;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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