What Drives Successful Economic Diversification in Resource-Rich Countries?

Blocking the Pathway out of the Resource Curse: What Hinders Diversification in Resource-rich Developing Countries?

Addisu A Lashitew, Michael L Ross and Eric Werker

The World Bank Research Observer, 2021, vol. 36, issue 2, 164-196

Abstract: The “resource curse” is often understood to imply poor growth in the non-resource sectors of the economy, but research into the diversification performance of resource-rich countries is limited. This paper surveys recent evidence and identifies empirical patterns in the economic diversification of resource-rich countries. Diversification is measured using the growth of per capita non-resource (manufacturing and services) sectors in domestic and export markets, which has a cleaner interpretation than competing measures. This measure is used to evaluate the long-term diversification of countries that started off as resource-dependent, and to rank countries according to their performance. We then identify policy-relevant correlates of diversification at the national level, including the acquisition of human capital, public and intellectual capital, and firm dynamism. More resource-dependent countries appear to perform worse on measures of human capital and intellectual capital, but more resource-abundant countries perform better on public capital and human capital accumulation. We examine the mechanisms behind diversification performance through in-depth case studies of Oman, Laos, and Indonesia, and conclude by identifying policy lessons and future research directions.

Keywords: diversification; resource curse; competitive capabilities; non-resource sectors; manufacturing; services (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (12)

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