Working Paper
The political economy of the resource curse

This paper reviews the recent literature on the developmental effects of resource abundance, assessing likely effects and channels with respect to income inequality, poverty, education, and health. To date, this area has received less analysis although it is relevant to the Sustainable Development Goals agenda, as a significant number of the world poor live in African resource-rich economies.

We argue that the presence of a natural resource sector per se does not necessarily translate into worse development outcomes. The natural resource experience varies to a significant extent. Countries with similar levels of resource rents can end up with significantly different achievements in terms of poverty, inequality, health, and education.

The challenge is to explain the different natural resource experiences. A pivotal mechanism behind the developmental effects of the natural resources sector is the type of states and political institutions that resource-abundant economies develop.