Challenges and Opportunities for Resource Rich Economies

Frederick (Rick) van der Ploeg

No 5688, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The political economy of resource rich countries is surveyed. The empirical evidence suggests that countries with a large share of primary exports in GNP have bad growth records and high inequality, especially if the quality of institutions and the rule of law are bad. The economic argument that a resource bonanza induces appreciation of the real exchange rate and a decline of non-resource export sectors may have some relevance. More important, a resource boom reinforces rent grabbing, especially if institutions are bad, and keeps in place bad policies. Optimal resource management may make use of the Hotelling rule and the Hartwick rule. However, a recent World Bank study suggests that resource rich economies squander their natural resource wealth and more often have negative genuine saving rates. Still, countries such as Botswana, Canada, Australia and Norway suggest it is possible to escape the resource curse. Some practical suggestions for a better management of natural resources are offered.

Keywords: Resource curse; Cross-country and panel evidence; Growth record; Dutch disease; Dependent economy; Real exchange rate; Debt overhang; Corruption; Rule of law; Institutions (search for similar items in EconPapers)
JEL-codes: C12 C13 E1 F43 K42 O41 Q3 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-afr, nep-env, nep-law and nep-pol
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Citations: View citations in EconPapers (36)

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