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Challenges and Opportunities for Resource Rich Economies

57 Pages Posted: 8 Aug 2006  

Rick van der Ploeg

University of Oxford

Date Written: May 2006


The political economy of resource rich countries is surveyed. The empirical evidence suggests that countries with a large share of primary exports in GNP have bad growth records and high inequality, especially if the quality of institutions and the rule of law are bad. The economic argument that a resource bonanza induces appreciation of the real exchange rate and a decline of non-resource export sectors may have some relevance. More important, a resource boom reinforces rent grabbing, especially if institutions are bad, and keeps in place bad policies. Optimal resource management may make use of the Hotelling rule and the Hartwick rule. However, a recent World Bank study suggests that resource rich economies squander their natural resource wealth and more often have negative genuine saving rates. Still, countries such as Botswana, Canada, Australia and Norway suggest it is possible to escape the resource curse. Some practical suggestions for a better management of natural resources are offered.

Keywords: Resource curse, cross-country and panel evidence, growth record, Dutch Disease, dependent economy, real exchange rate, debt overhang, corruption, rule of law, institutions, optimal resource depletion, Hotelling Rule, genuine saving, Hartwick Rule, natural resource wealth management

JEL Classification: C12, C13, E1, F43, K42, O41, Q3

Suggested Citation

van der Ploeg, Rick, Challenges and Opportunities for Resource Rich Economies (May 2006). CEPR Discussion Paper No. 5688. Available at SSRN: https://ssrn.com/abstract=921856

Frederick Van der Ploeg (Contact Author)

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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