A Renewed Conceptualization of the Resource Curse: How Multidimensionality of Natural Resource Wealth Matters for Sustainable Development

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A lack of consensus is dominating the academic debate regarding the impact of natural resources on sustainable development. The so-called transmission channels by which a resource curse might operate manifest at different stages of the resource processing cycle. Yet, earlier studies on sustainable development—as measured by the Genuine Savings indicator— scarcely account for the multidimensionality of the role of natural resources. Instead, most studies presume that measures of natural resource wealth can be used interchangeably, thus reflecting little on the validity of the indicator. This study addresses the shortcoming in the literature by explicitly modeling empirically the various theoretical avenues through which natural resources can foster or hamper sustainable development. Using a cross-country analysis of approximately 110 countries over 38 year time, this study finds that resource wealth itself does not trigger a curse. However, resource exporting countries develop less sustainably due to rent-seeking, especially when these countries’ governments are overly involved in the resource processing cycle. In contrast to what most studies suggest, we find no evidence that Dutch disease and price volatility lower sustainable development. Nevertheless, resource exporting countries struggle more to convert natural capital in produced and human capital than countries focusing on their domestic market. As such, the policy implication for resource-rich countries that develop unsustainably is use natural resources as factor of production for manufactured products that could eventually be traded on the international market to create comparative advantage.
Faculteit der Managementwetenschappen