Abstract
The “natural resource curse” refers to the apparent paradox in which nations with abundant natural resource endowments tend to have slower rates of economic growth, and less democracy and economic development, than do nations with lesser natural resource endowments. The salient question, of course, is whether or not this observed phenomenon is universal and inevitable, or is instead due to the particular details of a nation’s socio-political-economic structure.
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Notes
- 1.
The well-known Dutch disease occurs when the exports from a particular sector of a nation’s economy (e.g., the natural resource sector) grow significantly, thus driving-up the demand for its currency, strengthening its exchange rate, and reducing the demand for exports from its other sectors. See Sect. 12.4 for more details.
- 2.
And the feedback loops among them!.
- 3.
Other inputs to the production process such as education and technical progress are certainly possible. The current version of the model abstracts these factors into the stock of capital. Future versions of the model will include a more comprehensive set of inputs.
- 4.
The resource extraction companies are assumed to be owned by the state. As such private-owned companies, which are potentially operating internationally, e.g., the copper industry in Chile, are excluded from the analysis.
- 5.
Another way to interpret this logic is to consider the number of workers in each employment state as full-time equivalents.
- 6.
It is possible that a lack of freedom will actually encourage, rather than discourage, civil activism by a nation’s workforce. In the natural resource curse, model civil activism is assumed to be a concept that goes beyond purely political matters and encompasses environmental, cultural, and economic matters. As such, civil activism in total is assumed to diminish in the face of government coercion.
- 7.
Profitability is a normalized index representing profit that is generated per unit of capital. For more details, refer to the equations provided in the supplementary materials.
- 8.
The sensitivity of the model to these parameters was tested with Monte Carlo simulations during the validation phase of this study.
- 9.
The oil sector does not react to feedback from the rest of the model.
- 10.
Sensitivity analysis conducted on the model indicated that its results were very insensitive to this assumption.
- 11.
The simulation time span was set to 100 years so both short- and long-run dynamics of the natural resource curse problem could be explored.
- 12.
Note that the social utility is not discounted over time as it is not used for individual decision making but to measure the performance of the society under different conditions. To have a fair judgment, one should not discriminate between past, present, and future. Present for one person could be future for the other. Hence, all time periods must be valued equally.
- 13.
Again, a comprehensive documentation of the model, including the values used for each of its parameters, and initial values for each of its stocks, is contained in Langarudi (2016). A Vensim implementation of the model is provided as y material to this chapter.
- 14.
During the Monte Carlo experiments each scenario was simulated 5000 times.
- 15.
Remember that \(\rho < 0\) implies a potential natural resource curse. See Sect. 12.6 for more details.
- 16.
Note that outliers are removed from the figure to enhance its readability.
- 17.
See Footnote 15
- 18.
It can be shown that the same results hold if the model is initialized under conditions of “bad” institutional structure.
- 19.
A wage stickiness of 100% would represent a fixed wage.
- 20.
Once again see the feedback relationship presented in Fig. 12.16.
- 21.
Experimentation with the model revealed that, even if “economic growth” is the only scoring metric utilized, a natural resource curse result is still very unlikely.
- 22.
Although a blessing is still the most likely outcome.
- 23.
But, again, a blessing is still the most likely outcome of these scenarios.
- 24.
For example, by reducing the quality of the nation’s institutions along and lowering its normal saving and investment rates.
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Langarudi, S.P., Radzicki, M.J. (2021). Blessing or Burden? Another Look at the Natural Resource Curse. In: Cavana, R.Y., Dangerfield, B.C., Pavlov, O.V., Radzicki, M.J., Wheat, I.D. (eds) Feedback Economics. Contemporary Systems Thinking. Springer, Cham. https://doi.org/10.1007/978-3-030-67190-7_12
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