Resource Abundance, Poverty and Development

The negative correlation between resource endowments and GDP growth remains one of the most robust findings in the empirical growth literature, and has been coined the “resource curse hypothesis”. The policy consequences of this result are potentially far reaching. If natural resources are an inescapable curse, this may imply that countries richly endowed with natural resources can only develop by turning their backs on their comparative advantage and diversifying into other non-resource based activities. This paper analyzes whether the negative statistical relationship between natural resource abundance and economic growth spills over to other important economic and social indicators. The impact of resource wealth on several proxies of economic underdevelopment and welfare are scrutinized. While underdevelopment and welfare are clearly not independent of economic growth, it is known that there exist important differences between these variables. The research presented in this paper represents a step forward in the understanding of the resource curse, and the channels through which it is manifested.