Resource abundance vs. resource dependence in cross-country growth regressions

Abstract

Having analysed the macroeconomic performance of large oil exporters, I found that, in many cases, rents from natural resources have been successfully used to enhance economic growth. Nevertheless, adherents of the ‘resource curse’ seem to have found ample evidence suggesting that resource-abundant countries grow slower than resource-poor countries. A review of empirical research on the ‘resource curse’ reveals that the variables used were usually proxies for resource dependence. These variables introduce a bias, making less developed economies per se more resource ‘abundant’ than developed economies. As a consequence, a new variable, not containing any information on a country's stage of development, was introduced. Comparing the variables on resource dependence and resource abundance in a model by Sachs and Warner, resource abundance was not significant. In a new model, resource abundance was even positively correlated with growth.