Resource Abundance and Economic Development

Edited by R. M. Auty

WIDER Studies in Development Economics

356 pages | numerous figures and tables | 234x156mm

978-0-19-924688-5 | Hardback | 28 June 2001

Price: £86.00

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Provides a comprehensive explanation of the 'resource curse'
Develops two basic models to explain the divergent development trajectories of resource-poor and resource-rich developing countries
Demonstrates how policies for economic reform in both developing market economies and transition economies must be adapted to reflect endowments of natural and social capital

Since the 1960s the per capita incomes of the resource-poor countries have grown significantly faster than those of the resource-abundant countries. In fact, in recent years economic growth has been inversely proportional to the share of natural resource rents in GDP, so that the small mineral-driven economies have performed least well and the oil-driven economies worst of all. Yet the mineral-driven resource-rich economies have high growth potential because the mineral exports boost their capacity to invest and to import.

"Resource Abundance and Economic Development" explains the disappointing performance of resource-abundant countries by extending the growth accounting framework to include natural and social capital. The resulting synthesis identifies two contrasting development trajectories: the competitive industrialization of the resource-poor countries and the staple trap of many resource-abundant countries. The resource-poor countries are less prone to policy failure than the resource-abundant countries because social pressures force the political state to align its interests with the majority poor and follow relatively prudent policies. Resource-abundant countries are more likely to engender political states in which vested interests vie to capture resource surpluses (rents) at the expense of policy coherence. A longer dependence on primary product exports also delays industrialization, heightens income inequality, and retards skill accumulation. Fears of 'Dutch disease' encourage efforts to force industrialization through trade policy to protect infant industry. The resulting slow-maturing manufacturing sector demands transfers from the primary sector that outstrip the natural resource rents and sap the competitiveness of the economy.

The chapters in this collection draw upon historical analysis and models to show that a growth collapse is not the inevitable outcome of resource abundance and that policy counts. Malaysia, a rare example of successful resource-abundant development, is contrasted with Ghana, Bolivia, Saudi Arabia, Mexico, and Argentina, which all experienced a growth collapse. The book also explores policies for reviving collapsed economies with reference to Costa Rica, South Africa, Russia and Central Asia. It demonstrates the importance of initial conditions to successful economic reform.

Readership: Those working in the field of development economics in universities, development research institutes, leading developmental institutions, and NGOs. Also development consultants, those working in international corporations, and developing country civil servants.

I. Introduction
Richard M. Auty: Introduction and Overview
II. Critical Parameters in Resource-Based Development Models
2: Richard M. Auty and Sampsa Kiiski: Natural Resources, Capital Accumulation, Structural Change, and Welfare
3: Kirk Hamilton: The Sustainability of Extractive Economies
4: Nancy Birdsall, Thomas Pinckney, and Richard Sabot: Natural Resources, Human Capital, and Growth
5: Michael Woolcock, Lant Pritchett, and Jonathan Isham: The Social Foundations of Poor Economic Growth in Resource-Rich Countries
III. Long-Term Perspective on, and Models of, Resource-Based Growth
6: Ronald Findlay and Mats Lundahl: Natural Resources and Economic Development: The 1870-1914 Experience
7: S. Mansoob Murshed: Short-Run Models of Contrasting Natural Resource Endowments
8: Richard M. Auty and Alan H. Gelb: Political Economy of Resource-Abundant States
IV. Development Trajectories of Resource-Abundant Countries
9: Mahani Zainal Abidin: Competitive Industrialization with Natural Resource Abundance: Malaysia
10: Robert Osei: A Growth Collapse with Diffuse Resources: Ghana
11: Richard M. Auty and J. L. Evia: A Growth Collapse with Point Resources: Bolivia
12: Richard M. Auty: A Growth Collapse with High Rent Point Resources: Saudi Arabia
13: Richard M. Auty: Large Resource-Abundant Countries Squander their Size Advantage: Mexico and Argentina
V. Lessons for Policy Reform
14: Gustavo Barboza and José Cordero: Reforming a Small Resource-Rich Developing Market Economy: Costa Rica
15: Carolyn Jenkins: Growth, Capital Accumulation, and Economic Reform in South Africa
16: Richard M. Auty: Reforming Resource-Abundance Transition Economies: Kazakhstan and Uzbekistan
17: Anil Markandya and Alina Averchenkova: Reforming a Large Resource-Abundant Transition Economy: Russia
18: Thorvaldur Gylfason: A Nordic Perspective on Natural Resource Abundance
VI. Conclusions
19: Richard M. Auty: Conclusions: Resource Abundance, Growth Collapse, and Policy

Resource Abundance and Economic Development

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