Resource curse theory (Sachs & Warner and Ross)

Sachs and Warner argue that

resource abundant countries tend to be high-price economies & miss out on export-led growth

idea behind resource curse

Extremely resource-abundant countries have not experienced rapid economic growth

crowding-out idea of resource curse (Sachs and Warner)

natural resources crowd out other industries (manufacturing- non-traded) which actually drive growth

Why are resource rich countries high price economies? (Sachs and Warner)

Resource abundance renders export sectors uncompetitive - If non-traded prices in resource abundant countries are higher and traded prices across all countries are about equal, general price level will be higher in resource abundant countries

Ross argues that

Petroleum wealth makes authoritarian regimes more durable, increases corruption, and onsets conflict in low/middle income countries (especially when found in marginalized areas of ethnic groups)

rentier state (ross)

 state that receives substantial rents from foreign individuals, concerns, or governments

rents effect what? (ross)

rents damage government accountability and reduce economic growth

Ross - resource wealth impacts regime

The greater a country’s oil income, the less likely they are to transition to democracy - hinges on ability of rulers ability to capture the rents oil generates

Oil has what effect on regimes in general? (ross)

oil has pro-regime stability, not anti-democratic

What factors impact the likelihood of civil war over a resource? (Ross)

the location of the resource matters (offshore, onshore, poor area, marginalized ethnic group area) and type of resource. As value of resource wealth increases, the risk of conflict rises and then falls.