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An Analysis of the Relevance of the Resource Curse to Australia, and Policy Implications

25 Pages Posted: 24 Oct 2009  

Stanislav Bucifal

Australian National University (ANU) - Crawford School of Public Policy

Terry George

affiliation not provided to SSRN

Nur Ahmed

affiliation not provided to SSRN

Date Written: November 30, 2008

Abstract

This paper and associated presentation explores the economic phenomenon of the so called ‘resource curse’. We begin by defining the phrase and outlining the main individual ‘curses’ and their causes to give the reader a broad understanding of what is meant by the phrase. This is followed by an in‐depth examination of the transmission mechanisms for the resource curse, the theoretical underpinnings of the resource curse argument, and literature and case study evidence. Our examination of the evidence shows that the ‘curse’ is not uniformly spread among resource rich countries, but applies more in developing countries with weak institutional frameworks than in developed economies. In particular, there is little evidence to show that Australia is afflicted by the resource curse, a finding consistent with the above conclusion. Therefore Australia is free to enjoy the benefits of having resources and to pursue policies of economic growth, and we outline the key policies that will best achieve these objectives.

Our key conclusion is that the resource curse itself is a misnomer for the observation, and that rather than being ‘cursed’, nations with resources have to a large extent the capacity to control the economic effects of having the resources. The real problem is not a ‘resource curse’ but rather a ‘resource temptation’ that can result in a ‘curse’. The lesson in this for Australia is that we are not automatically immune from the resource curse, and that constant attention is needed to ensuring that we maintain an institutional framework that ensures continued benefit, without the detriments, that having resources can bring.

Keywords: Resource curse, Dutch Disease, institutions, governance, industry policy, trade policy, economic policy

JEL Classification: L70, L72, N20, N50, N57, O13, Q30, Q32, Q33, Q38

Suggested Citation

Bucifal, Stanislav and George, Terry and Ahmed, Nur, An Analysis of the Relevance of the Resource Curse to Australia, and Policy Implications (November 30, 2008). Available at SSRN: https://ssrn.com/abstract=1492943 or http://dx.doi.org/10.2139/ssrn.1492943

Stanislav Bucifal (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Terry George

affiliation not provided to SSRN

Nur Ahmed

affiliation not provided to SSRN

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