TY - JOUR

T1 - Natural resources

T2 - Curse or blessing?

AU - Van Der Ploeg, Frederick

PY - 2011/6

Y1 - 2011/6

N2 - Are natural resources a "curse" or a "blessing" The empirical evidence suggests that either outcome is possible. This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization, and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in nondemocratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.

AB - Are natural resources a "curse" or a "blessing" The empirical evidence suggests that either outcome is possible. This paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization, and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in nondemocratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.

UR - http://www.scopus.com/inward/record.url?scp=79959609006&partnerID=8YFLogxK

U2 - 10.1257/jel.49.2.366

DO - 10.1257/jel.49.2.366

M3 - Review article

AN - SCOPUS:79959609006

VL - 49

SP - 366

EP - 420

JO - Journal of Economic Literature

JF - Journal of Economic Literature

SN - 0022-0515

IS - 2

ER -