Is education really underfunded in resource-rich economies? Evidence from a panel of U.S. states

Existing development literature has argued that natural-resource endowments ``curse'' economic prosperity by reducing expenditures on education. According to this theory, public and private agents lack sufficient foresight to make optimal economic decisions and become poor as a result. Using a panel of U.S. state-level data, this paper offers evidence to the contrary. Public spending on education in resource-rich states greatly exceeds that in resource-scarce ones, and private education services are imperfectly crowded out as a result. More generally, this paper highlights the importance of exploiting both spatial and temporal variation in resource wealth when studying resource-rich economies.