The resource curse: Analysis of the applicability to the large-scale export of electricity from renewable resources

Abstract

The “resource curse” has been analyzed extensively in the context of non-renewable resources such as oil and gas. More recently commentators have expressed concerns that also renewable electricity exports can have adverse economic impacts on exporting countries. My paper analyzes to what extent the resource curse applies in the case of large-scale renewable electricity exports. I develop a “comprehensive model” that integrates previous works and provides a consolidated view of how non-renewable resource abundance impacts economic growth. Deploying this model I analyze through case studies on Laos, Mongolia, and the MENA region to what extent exporters of renewable electricity run into the danger of the resource curse. I find that renewable electricity exports avoid some disadvantages of non-renewable resource exports including (i) shocks after resource depletion; (ii) macroeconomic fluctuations; and (iii) competition for a fixed amount of resources. Nevertheless, renewable electricity exports bear some of the same risks as conventional resource exports including (i) crowding-out of the manufacturing sector; (ii) incentives for corruption; and (iii) reduced government accountability. I conclude with recommendations for managing such risks.