What Have We Learned about the Resource Curse?

Introduction

  • Natural resource wealth and political dysfunction have been studied extensively from 2001-2013.

  • Resource curse: Adverse effects of a country's natural resource wealth on its economic, social, or political well-being.

  • Initiatives to stop the resource curse have been launched by:

    • The World Bank

    • The G20

    • The United Nations Development Program

  • The resource curse has influenced debates in political science and economics.

  • This review examines the political effects of resource endowments on:

    • Government accountability

    • The quality of state institutions

    • The incidence of civil war

  • Strong evidence suggests petroleum:

    • Makes authoritarian regimes more durable

    • Leads to heightened corruption

    • Helps trigger violent conflict in low- and middle-income countries

  • Most research is based on observational data.

  • Unresolved issues include:

    • The scope of the resource effect

    • The conditions under which it occurs

    • The mechanisms that explain it

What Are Natural Resources and How Are They Measured?

  • There are three components to most definitions of “natural resources.”:

    • The type of resource.

    • The salient quality of the resource.

    • Method used to normalize the values.

  • Only petroleum has been consistently correlated with less democracy and worse institutions.

  • Common choices for the salient quality of the resource include:

    • The quantity of production

    • The value of production

    • The rents generated by production

    • The value of exports

  • The final component is the method used to normalize these values, for example:

    • As a fraction of GDP

    • A fraction of total exports

    • A fraction of total government revenues

    • By land area

    • On a per capita basis.

  • One of the most potentially important measures is also among the most difficult to obtain: government revenues from the extractive sector.

  • Resource curse skeptics suggest that any measures that are influenced by local decisions about resource extraction might be endogenous to the outcomes we care about.

Resource Wealth and Democracy

  • Most are broadly consistent with the claim that higher levels of oil wealth make autocratic governments more stable and hence less likely to transition to democracy.

  • The core finding that more oil wealth is associated with less democracy has been replicated many times.

  • Much of this research has tried to clarify the conditions under which petroleum wealth has these antidemocratic effects.

  • Two broad possibilities:

    • Oil could strengthen authoritarian governments and prevent them from transiting to democracy.

    • It could weaken democratic governments and push them toward authoritarianism.

  • The impact of oil wealth on democracies is more ambiguous.

  • New insights on this issue have emerged from subnational studies in democracies and semidemocracies.

  • Several studies argue that much depends on a ruler’s ability to capture the available resource rents.

  • Perhaps the most common argument is for the “rentier effect”: An abundant flow of oil revenues enables incumbents to both reduce taxes and increase patronage and public goods.

  • Oil-rich autocrats may invest more heavily in repression or spend more on the military.

  • There have been three types of challenges to the claim that oil prolongs autocracies.

    • The first comes from studies that test whether changes in levels of oil wealth lead to changes in levels of democracy.

    • The second challenge to claims of an oil–autocracy link is causal identification.

    • The final challenge raises questions about the net impact of petroleum wealth.

  • In short, there is strong evidence that higher levels of oil wealth help authoritarian regimes.

Resources and Institutions

  • The second branch of the resource curse literature looks at the relationship between resource wealth and the quality of institutions.

  • Petroleum is often associated with harmful outcomes, whereas other mineral resources typically are not.

  • Many studies report that oil wealth or aggregated measures of resource wealth are inversely correlated with measures of institutional quality.

  • There are many theories about how resource wealth could hurt institutional quality.

  • Claims about oil wealth and institutions have faced the same two questions as the rest of the resource curse literature:

    • Whether the observed correlations are truly causal.

    • Whether the direct, harmful effects of resource wealth are offset by indirect, beneficial ones.

Resources and Civil War

  • The third major branch of research looks at the effects of natural resource wealth on civil war.

  • Studies identify a harmful effect, albeit a conditional one.

  • There are three important differences between this and the other two branches.

    • Other kinds of natural resources seem to matter.

    • The effects of resource wealth on civil war appear to be nonmonotonic

  • Resource curse: refers to the paradox that countries with an abundance of natural resources, specifically non-renewable resources like minerals and fuels, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.