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The natural resource curse

Are natural resources really a curse? A cross country study and a detailed examination of Nigeria

Georgi Milyotev

on 10 December 2010

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Transcript of The natural resource curse

The natural resource curse Introduction The research Hypothesis some natural resources (oil and minerals in particular) have a negative effect on growth via institutions Nigeria has been a disastorus developmental experience GDP per capita
1970 - $1,113
2000 - $1,084 Income distribution
1970 - 37% percentige of people living under $1 a day
2000 - 70% Oil should have helped the GDP per capita? Oil revenue per capit GDP per capita
1965 - $245 $33
2000 - $325 $33 Where is this increase going? How to prove that? Cross country study Nigeria in detail Solutions to the problem Conclusion Discussion Solutions How can natural resources cause lower economic growth? 1. rent seeking 2. volatility in commodity prices 3. Dutch disease Growth1970–98 = µ+Conditioning Variables + Volatility of Prices + Overvaluation of Exchange Rate + Institutional Quality + Natural Resources + i Institutional Quality = Conditioning Variables + Volatility of Prices +
Overvaluation of Exchange Rate + Instruments for Institutional Quality + Natural Resourcesi + i Indirect effect of natural resources Direct cause Results Most of the findings are consistent with previous researches What is interesting then? There is NO significant relation between natural resources and economic growth??? There is a significat relation between natural resources and institutions There is an indirect relation between natural resources and growth There is a relation between institutions and growth How big is this indirect relation?
28.9*0.009 = 0.259
0.256*1.43 = 0.36% reduction in the annual growth of GDP per capita To sum up:

1. Resources are a curse. Not directly though

2. Minerals and oil are the worst possible resources a country could have Causes for the failure of Nigeria

1. Waste

2. Dutch disease To sum up:
Nigaria made some poor investment choices after the windfalls of oil Solutions: give power to the public sector 1. All revenues from oil go to the citizes or better yet - ONLY to women 2. Minimize corruption through cooperation 1. There is no direct relation between natural resources and growth

2. Natural resources affect growth through institutions

3. The wost types of natural resources are minerals and oil

4. In order to overcome the natural resource curse Nigeria needs to give more power to the public Georgi Milyotev
3-12-2010 Do you think that giving such power to the people will change things? Do you think that the same solution could be applied for all countries under the resource curse? Why didn't the same resource curse happen to Europe during the Industrial Revolution? Do you believe that giving all the revenues from oil to the public will reduce corruption?
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