- Resource curse
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- Ownership Structure and Institutions in Soviet Successor States
- Oil Is Not a Curse by Pauline Jones Luong (ebook)
However, even when the authorities attempt diversification in the economy, this is made difficult because resource extraction is vastly more lucrative and out-competes other industries. Successful natural-resource-exporting countries often become increasingly dependent on extractive industries over time. The abundant revenue from natural resource extraction discourages the long-term investment in infrastructure that would support a more diverse economy.
This lack of investment exacerbates the negative impact of sudden drops in the resource's price. While resource sectors tend to produce large financial revenues, they often add few jobs to the economy, and tend to operate as enclaves with few forward and backward connections to the rest of the economy. In many poor countries, natural resource industries tend to pay far higher salaries than would be available elsewhere in the economy.
Another possible effect of the resource curse is the crowding out of human capital ; countries that rely on natural resource exports may tend to neglect education because they see no immediate need for it. Resource-poor economies like Singapore , Taiwan or South Korea , by contrast, spent enormous efforts on education, and this contributed in part to their economic success see East Asian Tigers. Other researchers, however, dispute this conclusion; they argue that natural resources generate easily taxable rents that more often than not result in increased spending on education.
A study on coal mining in Appalachia "suggest that the presence of coal in the Appalachian region has played a significant part in its slow pace of economic development. Our best estimates indicate that an increase of 0. No doubt, coal mining provides opportunities for relatively high-wage employment in the region, but its effect on prosperity appears to be negative in the longer run. Another example was the Spanish Empire which obtained enormous wealth from its resource-rich colonies in South America in the sixteenth century.
The large cash inflows from silver reduced incentives for industrial development in Spain. Innovation and investment in education were therefore neglected, so that the prerequisites for successful future development were given up.go to link
Thus, Spain soon lost its economic strength in comparison to other Western countries. A study of US oil booms finds positive effects on local employment and income during booms but that after the boom, incomes "per capita" decreased, while "unemployment compensation payments increased relative to what they would have been if the boom had not occurred. A study found that active mining activity had an adverse impact on the growth of firms in tradeable sectors but a positive impact on the growth of firms in non-tradeable sectors.
Natural resources are a source of economic rent which can generate large revenues for those controlling them even in the absence of political stability and wider economic growth. Their existence is a potential source of conflict between factions fighting for a share of the revenue, which may take the form of armed separatist conflicts in regions where the resources are produced or internal conflict between different government ministries or departments for access to budgetary allocations.
This tends to erode governments' abilities to function effectively. Even when politically stable, countries whose economies are dominated by resource extraction industries tend to be less democratic and more corrupt. A meta-analysis of 69 studies found "that there is no aggregate relationship between natural resources and conflict. There are several factors behind the relationship between natural resources and armed conflicts. Secondly, conflicts can occur over the control and exploitation of resources and the allocation of their revenues the " resource war " argument.
Thirdly, access to resource revenues by belligerents can prolong conflicts the " conflict resource " argument. A literature review finds that oil makes the onset of war more likely and that lootable resources lengthen existing conflicts. It is not clear whether the pattern of petro-aggression found in oil-rich countries also applies to other natural resources besides oil.
A study finds that "oil production, oil reserves, oil dependence, and oil exports are associated with a higher risk of initiating conflict while countries enjoying large oil reserves are more frequently the target of military actions. Data for Syria and North Korea were unavailable. The emergence of the Sicilian Mafia has been attributed to the resource curse. Early Mafia activity is strongly linked [ qualify evidence ] to Sicilian municipalities abundant in sulphur, Sicily's most valuable export commodity.
A study argues that petrostates may be emboldened to act more aggressively due to the inability of allied great powers to punish the petrostate. A study found evidence of the resource curse in the American frontier period of the Western United States in the 19th century the Wild West. Today, the share of homicides and assaults explained by the historical circumstances of mineral discoveries is comparable to the effect of education or income.
A study in the Economic Journal found that "oil price shocks are seen to promote coups in onshore-intensive oil countries, while preventing them in offshore-intensive oil countries.
Research shows that oil wealth lowers levels of democracy and strengthens autocratic rule. There are two ways that oil wealth might negatively affect democratization. The first is that oil strengthens authoritarian regimes, making transitions to democracy less likely. Both pathways might result from the ability of oil-rich states to provide citizens with a combination of generous benefits and low taxes.
In many economies that are not resource-dependent, governments tax citizens, who demand efficient and responsive government in return.
This bargain establishes a political relationship between rulers and subjects. In countries whose economies are dominated by natural resources, however, rulers don't need to tax their citizens because they have a guaranteed source of income from natural resources. It has been argued rises and falls in the price of petroleum correlate with rises and falls in the implementation of human rights in major oil-producing countries. Corrupt members of national governments may collude with resource extraction companies to override their own laws and ignore objections made by indigenous inhabitants.
The Center for Global Development argues that governance in resource rich states would be improved by the government making universal, transparent, and regular payments of oil revenues to citizens, and then attempting to reclaim it through the tax system, which they argue will fuel public demand for the government to be transparent and accountable in its management of natural resource revenues and in the delivery of public services.
One study finds that "oil producing states dependent on exports to the USA exhibit lower human rights performance than those exporting to China".
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The authors argue that this stems from the fact that US relationships with oil producers were formed decades ago, before human rights became part of its foreign policy agenda. One study finds that resource wealth in authoritarian states lower the probability of adopting Freedom of Information FOI laws. One study looking at oil wealth in Colombia found "that when the price of oil rises, legislators affiliated with right-wing paramilitary groups win office more in oil-producing municipalities. Consistent with the use of force to gain power, positive price shocks also induce an increase in paramilitary violence and reduce electoral competition: fewer candidates run for office, and winners are elected with a wider vote margin.
Ultimately, fewer centrist legislators are elected to office, and there is diminished representation at the center. A study in International Studies Quarterly found that oil wealth was associated with weaker private liberties freedom of movement, freedom of religion, the right to property, and freedom from forced labor.
Ownership Structure and Institutions in Soviet Successor States
According to a study, "social forces condition the extent to which oil-rich nations provide vital public services to the population. Although it is often assumed that oil wealth leads to the formation of a distributive state that generously provides services in the areas of water, sanitation, education, health care, or infrastructure Subsequent tests find that oil-rich nations who experience nonviolent, mass-based movements provide better water and sanitation services than those who experience violent, mass-based movements.
Research links gender inequality in the Middle East to resource wealth,  and likewise for the problems of " petro-sexual politics " in Nigeria. Research finds that the more that states depend on oil exports, the less cooperative they become: they grow less likely to join intergovernmental organizations, to accept the compulsory jurisdiction of international judicial bodies, and to agree to binding arbitration for investment disputes.
There is an argument in political economy that foreign aid could have the same negative effects on the long run towards development as in the case of the resource curse. The so-called "aid curse" results from giving perverse political incentives on a weak body of civil servants, lowering politicians' accountability towards citizens and decreasing economic pressure thanks to the income of an unearned resource to mitigate economic crisis.
A study argues that the curse vanishes when looking not at the relative importance of resource exports in the economy but rather at a different measure: the relative abundance of natural resources in the ground. Using that variable to compare countries, it reports that resource wealth in the ground correlates with slightly higher economic growth and slightly fewer armed conflicts.
That a high dependency on resource exports correlates with bad policies and effects is not caused by the large degree of resource exportation. The causation goes in the opposite direction: conflicts and bad policies created the heavy dependence on exports of natural resources. When a country's chaos and economic policies scare off foreign investors and send local entrepreneurs abroad to look for better opportunities, the economy becomes skewed. Factories may close and businesses may flee, but petroleum and precious metals remain for the taking.
Resource extraction becomes the "default sector" that still functions after other industries have come to a halt. A article that examines the long-term relationship between natural resource reliance and regime type across the world from to reports that increases in natural resource reliance do not induce authoritarianism.
Roger D. Ronald K. Doug McAdam. Charles Tilly. Margarita Estevez-Abe. Regina Smyth. Layna Mosley. Stephen B. Yuhua Wang. Susan C. Kathleen Thelen. Melanie Manion. Joseph Jupille. Home Contact us Help Free delivery worldwide. Free delivery worldwide. Bestselling Series. Harry Potter. Popular Features. New Releases. Description This book makes two central claims: first, that mineral-rich states are cursed not by their wealth but, rather, by the ownership structure they choose to manage their mineral wealth and second, that weak institutions are not inevitable in mineral-rich states.
Each represents a significant departure from the conventional resource curse literature, which has treated ownership structure as a constant across time and space and has presumed that mineral-rich countries are incapable of either building or sustaining strong institutions - particularly fiscal regimes.
Oil Is Not a Curse by Pauline Jones Luong (ebook)
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