Corruption and the curse of natural resources

• Main Author: Pendergast, Shannon Marie
• Other Authors: van Kooten, G. Cornelis
• Language: English; en
• Published: 2007
• Subjects: natural resources; corruption; curse; economic development; economic growth; UVic Subject Index::Humanities and Social Sciences::Economics
• Online Access: http://hdl.handle.net/1828/281

In 1995, Jeffrey Sachs and Andrew Warner found a negative relationship between natural resources and economic growth, and claimed that natural resource abundance is a curse. The work of Sachs and Warner has been widely cited, and many economists now accept the curse of natural resources as a proven phenomenon (e.g. Papyrakis and Gerlagh, 2004; Kronenberg, 2004). In this thesis, I provide a new framework for evaluating this claim. I begin by providing a summary of the related literature and discussion of possible explanations for the curse. This summary is followed by a critical assessment of the theory underlying previous research. Next, I develop a new model for evaluating the curse of natural resources. I find that natural resource abundance does not directly impact economic development. However, petroleum resources are associated with rent-seeking behaviour that can negatively influence economic development. Finally, I show that my results are robust to various sensitivity analyses. The results from my model provide a deeper understanding of how natural resource abundance affects economic outcomes.