Natural resources and economic development: a critical perspective

This paper investigates “lights” and “shadows” of a specialisation in natural resources in (developing) resource abundant countries. It has been argued that the most negative consequence of such a specialisation is that it may hinder economic development (resource curse). However, the economic consequences of specialising in natural resources vary significantly across countries. Furthermore, we emphasise that natural resource specialisation tends to favour, and is hence associated with, the emergence of structural weaknesses that may lead a country to the extreme and variegated case of resource curse. We suggest that the removal of two major and intertwined structural weaknesses associated with specialisation in natural resources production, i.e. the lack of innovation in the natural resources sector and the lack of diversification of productive activities – by developing new specialisations - in developing resource-abundant countries may be a successful strategy to reduce curse risks, and to pursue natural resource-based development.