Natural Resources, Institutions Quality, and Economic Growth; A Cross-Country Analysis


1 STM College, University of Saskatchewan, Saskatoon, SK, Canada

2 Department of Economics, McGill University, Montreal, Canada


Natural resources as a source of wealth can increase prosperity or impede economic growth.  Empirical studies with different specifications and data are also mixed on whether natural resources are curse or blessing. In fact, the variety of model specifications, measurements, and samples in the empirical literature makes it difficult to generalize the results. In this study, a growth model including natural resources is developed to estimate the effect of natural resource dependency on economic growth, using different measures of natural resources and controlling for the quality of institutions in 149 countries during 1996-2010. The results show that natural resource abundance, proxied by per capita natural wealth, has a positive and significant effect on GDP growth.  However, the impact of natural resource dependency on GDP growth depends on the type of natural resources and the quality of institutions. Fuel dependency, for example, can be considered a strong curse, as it has no effect on GDP growth, and agriculture and food dependency a weak curse, as it can increase GDP growth in the presence of good institutional qualities. Results also show that among different indexes used for institutional qualities, government effectiveness, regulatory quality, and rule of law are more effective in avoiding the negative effect of resource dependency. The thresholds above which different types of institutional qualities can turn a curse to a blessing are also estimated for different types of natural resource dependency.

[1]. We would like to thank participants at the Departmental Seminar at the University of Saskatchewan in October 2013, the STM faculty seminar in November 2014, and the 7th International Interdisciplinary Social Science Conference, held in Barcelona, Spain, June 2012, for their helpful comments.


Acemoglu, D., Johnson, S., & Robinson, J. (2001). Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(5), 1369-1401.
Aghion, P., & Howitt, P. (2009). The Economics of Growth. Massachusetts: The MIT Press.

Alexeev, M., & Conrad, R. (2011). The Natural Resource Curse and Economic Transition. Economic Systems, 35(4), 445-461.

Arezki, R., & Ploeg, F. V. D. (2011). Do Natural Resources Depress Income Per Capita? Review of Development Economics, 15(3), 504-521.
Bhattacharyya, S., & Hodler, R. (2010). Natural Resources, Democracy and Corruption. European Economic Review, 54(4), 608-621
Boschini, A. D., Pettersson J, & Roine, J. (2007). Resource Curse or Not: A Question of Appropriability. Scandinavian Journal of Economics, 109(3), 593-617.

Boyce, R. J., & Herbert Emery, J. C. (2011). Is A Negative Correlation Between Resource Abundance And Growth Sufficient Evidence That There Is A Resource Curse? Resource Policy, 36, 1-13.

Brunnschweiler, C. N., & Bulte, E. H. (2006). The Resource Curse Revisited and Revised. CER-ETH - Center of Economic Research at ETH Zurich, Working Paper, Retrieved from

Cavalcanti, T. V., Mohaddes, K., & Raissi, M. (2011). Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis. The Quarterly Review of Economics and Finance, 51, 305-318.

Collier, P., & Hoeffler, A. (2009). Testing the Neo-Con Agenda: Democracy in Resource-Rich Societies. European Economic Review, 53, 293-308.
---------- (1998). On Economic Causes of Civil War. Oxford Economic Papers, 50(4), 563-573.
Corden, W. M. (1984). Booming Sector and Dutch Disease Economics: Survey and Consolidation. Oxford Economic Papers, 36(3), 359-380.
Dietz, S., Neumayer, E., & de Soysa, I. (2007). Corruption, the Resource Curse and Genuine Saving. Environment and Development Economics, 12(1), 33-53.
Frankel, J. A. (2010). The Natural Resource Curse: A Survey. NBER Working Paper, 15836, Retrieved from
Gylfason, T. (2011). Natural Resource Endowment: A Mixed Blessing? CESifo Working Paper, Retrieved from
Haber, S., & Menaldo, V. (2009). Do Natural Resources Fuel Authoritarianism? A Reappraisal of the Resource Curse. American Political Science Review, 105(1), 1-26.
Hall, R., & Jones, C. (1999). Why Do Some Countries Produce So Much More Output per Worker than Others? Quarterly Journal of Economics, 114(1), 83-116.
Hirschman, A. O. (1958). The Strategy of Economic Development. New Haven: Yale University Press.

Hodler, R. (2006). The Curse of Natural Resources in Fractionalized Countries. European Economic Review, 50(6), 1367-86.

Jones, C. I. (2002). Introduction to Economic Growth (2nd Ed.).
New York: Norton.
Keefer, P. (2010). Database of Political Institutions: Changes and Variable Definitions. Retrieved from
Matsuyama, K. (1992). Agricultural Productivity, Comparative Advantage and Economic Growth. Journal of Economic Theory, 58(2), 317-334.
Mehlum, H., Moene, K., & Torvik, R. (2006). Institutions and the Resource Curse. Economic Journal, 116(508), 1-20.
Moshiri, S. (2015). Asymmetric Effects of Oil Price Shocks in Oil-Exporting Countries; The Role of Institutions. The OPEC Energy Review, 39(2), 222-246.
Mwangi, E., & Meinzen-Dick, R. S. (2009). Understanding Property Rights in Land and Natural Resource Management. In J. F. Kirsten, A. R. Dorward, C. Poulten, & N. Vink (Ed.), Institutional Economics Perspectives on African Agricultural Development. Washington, DC: International Food Policy Research Institute (IFPRI).
Nomman, A. M., Maas, S., & Schmitz, P. M. (2010). Analyzing Agricultural Productivity Growth in a Framework of Institutional Quality.  Retrieved from
Polterovich, V., Popov, V., & Toni’s, A. (2010). Resource Abundance: A Curse or Blessing? DESA Working Paper, Retrieved from

Ross, M. (2001). Does Oil Hinder Democracy? World Politics, 53(3), 325-361.

Sachs, J. D., & Warner, A. M. (2001). Natural resources and economic development: The curse of natural resources. European Economic Review, 45, 827-838.
---------- (1997). Sources of Slow Growth in African Economies. Journal of African Economies, 6(3), 335-376.
---------- (1995). Natural Resource Abundance and Economic Growth. In G. Meier, & J. Rauch (Eds.), Leading Issues in Economic Development. New York: Oxford University Press.
Sala-I-Martin, X., & Subramanian, A. (2003). Addressing the Natural Resource Curse: An Illustration from Nigeria. IMF Working Paper, Retrieved from
Tornell, A., & Lane, P. (1999). The Voracity Effect. American Economic Review, 89(1), 22-46.
Torvik, R. (2001). Learning by Doing and the Dutch Disease. European Economic Review, 45, 285-306.