EXPLAINING THE RESOURCE CURSE, WITH SPECIAL REFERENCE TO MINERAL-EXPORTING COUNTRIES

Recent studies have found an inverse correlation between economic grow th and natural resource abundance among developing countries, There ap pears to be no obvious explanation for this finding, such as an import ant growth variable that is common in resource-poor countries and defi cient in resource-abundant countries. The resource curse hypothesis is closely related to the problem of sustainability for resource-exporti ng countries since periods of high growth are frequently followed by l ong periods of stagnation, Models are examined showing how increases i n export income can affect relative prices in the trade and nontrade s ectors and how the changes in relative prices affect investment and gr owth. It is the thesis of this article that there is nothing inherent in resource-abundance that condemns countries to either low growth or nonsustainability. (C) 1998 Elsevier Science Ltd. All rights reserved.