How Natural Resources Affect Economic Development
Publisher: Development Policy Review
Author(s): Richard M. Auty
Date: 2000
Topics: Conflict Causes, Economic Recovery, Extractive Resources, Governance, Renewable Resources
Countries: Bolivia, Ghana, Malaysia, Saudi Arabia
This article argues that variations in economic performance are caused by differences in the quality of governance that are linked through the type of political state and the pattern of structural change to the natural resource endowment. It develops two models to explain the diverging performance of resource-poor and resource-abundant countries. These are described in the following section. They are presented as stylised facts models, rather than mathematical models, in order to be accessible to non-economists. The remainder of the article uses case studies to calibrate the models for differing permutations of the political state and natural resource endowment. More specifically, the third section applies the models to Malaysia and Ghana in order to show why countries with similar and favourable initial conditions but different political states will trace different development trajectories. The fourth section applies the models to a category of resource-abundant country, the mineral economy, which has performed relatively poorly, with reference to Bolivia and Saudi Arabia. The final section draws the conclusions.