Explaining the resource curse, with special reference to mineral-exporting countries

Abstract Recent studies have found an inverse correlation between economic growth and natural resource abundance among developing countries. There appears to be no obvious explanation for this finding, such as an important growth variable that is common in resource-poor countries and deficient in resource-abundant countries. The resource curse hypothesis is closely related to the problem of sustainability for resource-exporting countries since periods of high growth are frequently followed by long periods of stagnation. Models are examined showing how increases in export income can affect relative prices in the trade and nontrade sectors and how the changes in relative prices affect investment and growth. It is the thesis of this article that there is nothing inherent in resource-abundance that condemns countries to either low growth or nonsustainability.