Revisiting the Natural Resource ‘Curse’ in the Context of Trade in Value Added: Enclave or High-Development Backward Linkages?

Abstract

This paper puts forward and empirically tests the conjecture that specialisation in Natural Resource Industries (NRI) might not necessarily be a ‘curse’ for (developing) countries, if it provides opportunities for export diversification in backward linked sectors a la Hirschman. We first revisit the evolution of the debate around the NRI ‘curse’, including those from scholars sceptical of diversification based on beneficiation from NRI. We then empirically test whether NRI might represent a sufficient “domestic representative demand” a la Linder for backward linked sectors such as Knowledge Intensive Business Services (KIBS) or high tech manufacturing that might provide new opportunities for export diversification led by virtuous pathways of domestic structural change. We find empirical support for this conjecture and discuss some implications that revisit the NRI curse debate.