The Resource Curse
June 20 - 24, 2005
Trondheim, Norway

One of the puzzling regularities of economic growth is that many countries rich on natural resources have had such a poor growth performance. A typical illustration is given in the figure below, which shows the correlation between resource exports as a share of GDP for a number of countries and their GDP growth. Similar figures can be drawn for the connection between natural resources and conflict, or between natural resources and democracy. Correlations of this sort motivate what has been coined “the paradox of plenty” or “the resource curse”: Richness in natural resources seems, at least for the last decades, to lead to a bad economic and political outcome.

Four main explanations of the resource curse have been proposed: 1) Dutch disease, 2) Rent-seeking, 3) Resource abundance generates bad economic policy choices and 4) Resource abundance undermines political institutions. The course aims to make students able to push the research in these fields forward, to draw normative policy implications, and to open up new research agendas on the resource curse. The course will start with a short overview of the traditional empirics of the connection between resource abundance and growth, as well as short overviews of Dutch disease and traditional rent seeking literature. The main part of the course will deal with more recent research developments in political science and economics.

In order to understand the resource curse one needs to merge insights from political science and economics. Natural resource wealth may work very different in different institutional and political settings. While oil may be a blessing in Norway it may be a curse in Venezuela. While diamonds may produce violent conflict in Sierra Leone they may contribute to prosperity in Botswana. The most interesting aspect of the resource curse is maybe not that natural resource wealth on average reduce growth, but that the economic and political outcome is so different in different resource abundant countries. To understand the resource curse one needs to study how economic factors shape institutions, and how institutions shape economic factors. Thus, insights from political science and economics need to be merged.

Also, much of the existing empirical literature on the resource curse suffers from missing variables and endogeneity problems. It is not clear to what extend bad economic and political development causes countries to be resource dependent, or to what extend resource dependence causes bad economic and political development. The last part of the course will focus on new literature that takes such concerns seriously, and discuss how to deal with them in empirical analysis.

Write a research proposal related to the resource curse. Describe in detail the planned research project, and relate it to the existing literature on the resource curse. The research proposal may be approximately 10-15 pages (double-spaced) long.

The research proposal should be emailed to ragnar.torvik@svt.ntnu.no within October 1st 2005.

Lectures

Literature

Slides (in pdf format) from Michael L. Ross:
Minerals and Civil War
Minerals and Democracy
The Resource Curse and Institutions

Halvor Mehlum, Associate Professor, Department of Economics, University of Oslo. Mehlum received his PhD in 1999. He has many published or accepted journal articles in journals such as The Economic Journal, European Economic Review, Journal of Development Economics and Journal of International Economics. He is a member of Working Group 5 (Global Economic Change and Civil War) at the Centre for the Study of Civil War at PRIO.

Karl Ove Moene, Professor, Department of Economics, University of Oslo. Moene is one of Norway’s most internationally influential economists. He has published articles in journals such as American Economic Review, American Political Science Review, Economic Journal, European Economic Review, Journal of Development Economics, Journal of Public Economics and World Politics. He has been an editor of Scandinavian Journal of Economics, and is the leader of Working Group 5 (Global Economic Change and Civil War) at the Centre for the Study of Civil War at PRIO.

Edward Miguel, Assistant Professor, Department of Economics, University of California, Berkeley. Miguel holds a PhD from Harvard (2000) and is one of the most promising economists below 30. He has articles published or accepted in journals such as Econometrica, Journal of Political Economy, Review of Economic Studies, Journal of Public Economics and World Politics.

Michael L. Ross, Assistant Professor, Department of Political Science, University of California, Los Angeles. Ross holds a PhD from Princeton (1997) and is one of the most influential political scientists writing on the resource curse. In addition to his book on institutional breakdown in Southeast Asia, he has published in journals such as British Journal of Political Science, International Organization, Journal of Conflict Resolution, and World Politics.

Ragnar Torvik, Professor, Department of Economics, Norwegian University of Science and Technology. Torvik received his PhD in 1995. He has published extensively on several topics, and in particular on the resource curse in journals such as The Economic Journal, European Economic Review, Journal of Development Economics and Journal of Public Economics. He is a member of Working Group 5 at the Centre for the Study of Civil War at PRIO.

Trondheim Airport is at Værnes, 35 kilometres northeast of the city. Coaches leave from Trondheim Airport to the city 15 minutes after the time of arrival for SAS/Braathens SAFE flights. The price is NOK 65.

From centre of town there it is a 15 minutes bus trip to the University Campus at Dragvoll. Bus number 5 and 9 goes at regular intervals between central city and the University Campus. The price is NOK 22.

The lecture hall for the Resource Curse is Auditorium 6, please see map.

Professor Ragnar Torvik (+47) 73 59 14 20
Senior Executive Officer Øystein Røkke, (+47) 73 59 16 62