April 18, 2023 1

The Challenge of Natural Resource-led Development in

Small EconomiesDr. Maiju Johanna Perälä

Department of Economics

The University of the West Indies, MonaPrepared for the presentation at

Association of Caribbean Economists’ conference on ”Economic Growth and Transformation—Reassessing

Challenges and Prospects at the Datwn of the 21st Century”

April 18, 2023 2

Purpose of the paper• To provide an explanation why growth has failed

in some countries over the long-term, especially those that are small in size

• To investigate whether natural resource endowment type is relevant as argued within the development economics literature (Hirschman 1977,1981; Auty 1995, 2001)

• To clarify a mechanism that generates (or has potential to generate) a resource curse, an important explanation for failing growth in the post era

April 18, 2023 3

Main arguments and findings• Natural resource endowment type matters for

growth, or for lack of it, especially when coexisting with the lack of social cohesion

• Oil and mineral resource endowment more negatively correlated with growth than an agricultural one

• The above findings are robust to different growth regression specifications (cross-section, time-series)

• The phenomenon is especially troublesome for small economies as, in addition to the resource curse phenomenon, they face a greater challenge for manufacturing development.

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Stylized facts of growth failures

• Regionally concentrated: Sub-Saharan Africa and Latin America and the Caribbean

• Stage of development is relevant: Tend to occur at early phases of development

• Size of the economy matters: More likely to occur in small than large economies

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Regional concentration: long term failures

Burundi Somalia Cameroon GuyanaCentral African Republic South Africa Congo, Rep. HondurasChad Togo Kenya ParaguayCongo, Dem. Rep. Zambia Malawi PeruCote d'Ivoire Mali Trinidad and TobagoGhana Bolivia MauritaniaLiberia Haiti Nigeria IranMadagascar Jamaica Zimbabwe JordanNiger Nicaragua Saudi ArabiaRwanda Venezuela EcuadorSenegal El Salvador PhilippinesSierra Leone Guatemala

a Catastrophic growth failure is defined to have occurred in those economies in which current per capita income level was reached during 1960s or before. b Severe growth failure is considered to have occurred in those economies in which current per capita income level was reached during 1970s or 1980s.

Table 1 Economies with Persistent Growth Failures

Catastrophica Severeb

Note: Sample includes a total of 95 economies with real per capita income series available in World Bank (2001).Countries are grouped according to their geographical region and ordered alphabetically within regions.

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Regional concentration:recent failures

Burundia Nigera Ecuadorb

Cameroonb Nigeriab Jamaicaa

Central African Republica Rwandaa Paraguayb

Chada Sierra Leonea

Congo, Dem. Rep.a South Africaa Saudi Arabiab

Congo, Rep.b Togoa

Kenyab Zambiaa Switzerland

Madagascara

Table 2 Recent Growth Failures

Note: Sample includes a total of 95 economies with real per capita income series available in World Bank (2001). Countries are grouped according to their geographical region and ordered alphabetically within regions. Developed countries in italics. a Countries with continuing catastrophic growth failures.b Countries with continuing severe growth setbacks.

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Regional concentration:growth successes

Burkina Faso Australia Austria Cyprus

Lesotho Bangladesh Belgium Egypt

Mauritius Hong Kongb Denmark Israel a

Sudan India Finland Lebanona

Indonesiab France Moroccoa

Argentinaa Japanb Greece Syrian Arab Republic

Brazilb Korea, Rep. Ireland Turkeya

Canada Malaysiab Italy Tunisia

Chilea Myanmara Netherlands

Colombiab Nepal Norway

Costa Rica New Zealand Portugal

Dominican Republic Pakistan Spain

Mexico Singapore Sweden

Panama Sri Lanka United Kindgom

Uruguay Thailandb

United States

a Per capita income peaked in 1998.

Table 3 Relative Growth Successes

Source: Constructed by the author based on World Bank (2001).

Note: Sample includes a total of 95 economies with available statistics. Countries are grouped according to their geographical region and ordered alphabetically within regions. Developed countries in italics.

b Country categorized as growth success based on long term performance.

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Stage of developmentTable 4a Percentage of Growth Failures and Successes by Income Level

Catastrophica Severeb Total Total Continuing

Income level

High 0 0 0 5.9 0 94.1Middle

Upper 13.6 22.7 36.4 13.6 13.6 63.6Lower 27.3 31.8 59.1 18.2 18.2 40.9

Low 35.3 23.5 58.8 35.3 35.3 38.2

b Severe growth failure is considered to have occurred in those economies in which current per capita c Recent growth setback is defined as 1999 real per capita income level below that of 1990.d Growth success is defined as 1999 or 1998 real per capita income above that in 1990. See footnote 5 for a more detailed description of the classification method.

Growth

successd

Degree of long term failure Recent growth setbacksc

Note: All calculations based on 1960 groupings. See appendix 3 for sample description, group definitions and membership.a Catastrophic growth failure is defined to have occurred in those economies in which current per capita income level was reached during 1960s or before.

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Relevance of sizeTable 4b Percentage of Growth Failures and Successes by Size

Catastrophica Severeb Total Total Continuing SizeLarge

> 25 million 0 11.1 11.1 5.6 5.6 88.9> 20 million 0 14.3 14.3 4.8 4.8 85.7> 15 million 8.0 12.0 20.0 12.0 4.0 80.0> 10 million 6.9 10.3 17.2 10.3 3.4 82.8

Small< 25 million 27.3 23.4 50.6 24.7 23.4 46.8< 20 million 28.4 23.0 51.4 25.7 24.3 45.9< 15 million 27.1 34.3 51.4 24.3 22.9 45.7< 10 million 28.8 25.8 54.5 25.8 24.2 42.4

Minif 5.9 35.3 41.2 26.5 20.6 52.9

Note: All other categories same as before.e Size of an economy approximated by population size.f Defined as those economies with population less than half a million in 1960.

Degree of long term failure Recent growth setbackscGrowth

successd

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Observations on failures• Striking patterns: persistence and regional

concentration

• Raises questions whether common explanation(s) for these failures can be found

• Growth failures appear to have had difficulties in initiating growth, focus on initial conditions seems appropriate

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Common explanations for failing growth• African growth literature

– Lack of openness (SW 1997), poor policies (Collier&Gunning 1999).

– Ethnic divisions, neighborhood effects (EL 1997, 1998)

– Low investment and high population growth (Hoeffler 2002)

• Challenges of economy size– Relatively small domestic markets,

manufacturing potential requires favorable external market conditions

– More vulnerable to external fluctuations due to greater exposure

– Lack of diversification within the economy, terms of trade fluctuations stronger effect

– Small developing countries more reliant on primary products that experience greater volatility

• Natural resource abundance and growth– Easy riches lead to sloth (Bodin 16th

Century)– Natural resource curse thesis (Auty

1995, Gelb et al 1998)– Dutch disease (Corden 1984, Neary &

van Wijnbergen 1986, Ros 2000)– Terms of trade (Prebisch 1950, Singer

1950)– Instability (Gelb et al 1988, Tarshis

1986)– Staples and economic development

(Hirschman 1977, 1981)– Analytical survey (Ros 2000)

April 18, 2023 13

Linkages view on development• Natural resource endowment type matters

to development (Hirschman 1981)• Captures the notion how “one thing leads to

another”, interdependence of economic activity, linkages application to natural resource-led development

• Process of growth through various linkages:– Production linkages– Consumption linkage– Fiscal linkage

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Physical production linkages

Production A

Imported inputs

Domestic production of inputs

Final demand orproduction B

Production C

Backward linkage

Forward linkage

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Consumption linkage

Production A

via L-intensive methods

Final demand

Consumption goods

industryPotential backward linkages

Potential forward linkages

Consumption linkage from labor incomes

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Fiscal linkage

Government

Production A

Limited production linkages

Limited consumption

linkages

Enhance production linkages

Enhanceconsumption

linkages‘Enclave’ production

Sociopolitical environment

critical

Typical of mineral and fossil fuel

extractive industries

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Challenge of fiscal linkage• Indirect, it requires:

– ability to collect taxes

– well-designed development policy

– capacity to implement the policy and to target the funds in most productive activities

– indirectness leaves room for mistargetting of funds, or even for their loss through rent-seeking

• Challenge posed by economy size:

– management more costly to small economies, economies of scale not as attainable as for large ones (ratio of government expenditures/gdp smaller for large ecos, fixed costs of governance higher per population for small ones)

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Linkages approach to staples• The nature of economic activity determines the relative

importance of each linkage• Agricultural production labor-intensive, likely to

generate a consumption linkage• Mining and fossil fuel extractive industriesenclaves• Enclaves, limited production and consumption linkages,

the importance of fiscal linkage is elevated and the role of political economy aspects and development policy are brought to the forefront

• Fiscal linkage, critical for small developing countries rich in extractive natural resources poses a greater challenge given that it is more costly, depleting development funds

April 18, 2023 19

Linkage approach continued

• Technological apects of staples can be limiting, but not deterministic

• Sociopolitical environment important• If environment is conducive to welfare

maximizing policieslimited development potential of a staple can be overcome through an efficient management of the fiscal linkage (through effective development policy)

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Empirical methods

• Simple statistical evidence—highlights the phenomenon

• Initial conditions analysis– initial real per capita income and education level

– Sachs and Warner (1997) initial conditions

• Cross-country growth regression analysis– Sachs and Warner (1997), Barro (1991), MRW (1992),

King and Levine (1993), DeLong and Summers (1991)

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Sample and natural resource data• 95 market economies with population more

than half a million (sample confirms with established studies and methods).

• Natural resouce endowment categorization following Auty (2001):– resource rich economies—per capita cropland

>0.3 hectares– extractive (point source) economies—fuel and

mineral exports > 40 % of total exports– agricultural (diffuse) economies—remaining

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Proxying social cohesion and enclave effect

• Social cohesion is considered to capture sociopolitical environment, proxied by ethnolinguistic fractionalization (ELF) (EL 1997, Mauro 1995)

• Interaction term between extractive endowment and ELF should capture ’enclave effect’ in a poor policy environment

April 18, 2023 23

Growth Failures & Resource Endowment: long term failures by country

Burundid Somaliae Cameroond Guyanad

Central African Rep.c South Africad Congo, Rep.c Hondurasd

Chadd Togoc Kenyae Paraguayd

Congo, Dem. Rep.c Zambiac Malawid Peruc

Cote D'Ivoired Malid Trinidad and Tobagoc

Ghanaf Boliviac Mauritaniae

Liberiac Haitie Nigeriac Iranc

Madagascard Jamaicac Zimbabwed Jordane

Nigerc Nicaraguad Saudi Arabiac

Rwandad Venezuelac Ecuadorc

Senegald El Salvadore Philippinese

Sierra Leonec Guatemalad

e Resource poor economy. Classified based on Auty (2001).f Agricultural economy in which rent extraction channel is argued to operate in a fashion common to extractive economies.

d Agricultural natural resource economy. Classified based on Auty (2001).

c Extractive natural resource economy. Classified based on Auty (2001).

Table 5a Growth Failure Economies and Natural Resource Endowment

Catastrophica Severeb

Note: Countries grouped according to geographical regions and listed in alphabetical order. Resource poor economies in bold.

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Growth & Resource Endowment: failures and successes by country group

Resource endowment Catastrophic Severe All failures Success

Resource rich 34.5 27.3 61.8 36.4Extractive 45.5 31.8 77.3 18.2Agricultural 27.3 24.2 51.5 48.5

Resource poor 11.1 27.8 38.9 61.1

f Agricultural economy in which rent extraction channel is argued to operate in a fashion common to extractive economies.

d Agricultural natural resource economy. Classified based on Auty (2001).

c Extractive natural resource economy. Classified based on Auty (2001).

e Resource poor economy. Classified based on Auty (2001).

Table 5b Growth Failure Economies and Natural Resource Endowment

Degree of growth failure (%)

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Growth and Social Fragmentation by Endowment Type: fragmented economies

Bolivia 0.4 Cameroon 0.6 Belgium 2.6Burkina Faso 1.2 Chad -0.7 Canada 2.1Central African Republic -0.7 Cote d'Ivoire 0.8 Indonesia 3.5Congo, Dem. Rep. -3.0 Ghana -0.2 Kenya 1.3Congo, Rep. 1.1 Guatemala 1.3 Mauritius 3.3Ecuador 1.5 Guyana 0.6 Nepal 1.0Niger -1.7 India 2.3 Philippines 1.2Nigeria 0.3 Malawi 1.2 Singapore 5.9Papua New Guinea 1.5 Malaysia 3.9 Spain 3.3Peru 0.6 Mali Sri Lanka 2.8Sierra Leone -1.2 Morocco 1.7 Switzerland 1.4South Africa 0.8 Myanmar 1.6 United States 2.2Togo 0.9 Pakistan 2.7Trinidad and Tobago 2.5 Senegal -0.3Zambia -1.3 Sudan 0.8

Thailand 4.5Zimbabwe 1.1

Growth 0.2 1.4 2.5 (2.7)Social fragmentation 69.9 68.9 60.3 (64.3)

Abo

ve a

vera

ge s

ocia

l fr

agm

enta

tiona

Group average

Note: This table organizes economies into groups according to their natural resource endowment and level of social cohesion. Within groups, economies are listed in alphabetical order. Growth rates are percentages. Data in parenthesis are for resource poor economies. See appendix for data source information.

Table 6 Growth according to Natural Resource Endowment and Level of Social Fragmentation

Natural resource typeExtractive Agricultural Other

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Growth and Social Fragmentation by Endowment Type: cohesive economies

Chile 2.5 Argentina 1.0 Australia 2.2Dominican Republic 2.6 Brazil 2.4 Austria 2.8Jamaica 0.5 Burundi 0.3 Colombia 1.8Syrian Arab Republic 2.5 Costa Rica 1.9 CyprusVenezuela -0.4 Honduras 0.8 Denmark 2.1

Lesotho 2.9 Egypt, Arab Rep. 3.1Madagascar -1.2 El Salvador 0.7Mexico 2.0 Finland 2.9Nicaragua -0.8 France 2.6Panama 2.0 Greece 3.4Paraguay 1.7 Haiti -1.0Rwanda -0.4 Hong Kong, China 5.1Uruguay 1.2 Ireland 3.9

Israel 2.9Italy 2.8Japan 4.2JordanKorea, Rep. 5.8Mauritania 1.3Netherlands 2.4New Zealand 1.3Norway 3.1Portugal 3.9SomaliaSweden 2.1United Kingdom 2.0

Growth 1.5 1.1 2.7 (1.9)Social fragmentation 11.2 16.7 12.4 (10.5)

Belo

w a

vera

ge s

ocia

l fr

ag

men

tati

on

a

Group average

Note: This table organizes economies into groups according to their natural resource endowment and level of social cohesion. Within groups, economies are listed in alphabetical order. Growth rates are percentages. Data in parenthesis are for resource poor economies. See appendix for data source information.

Table 6 Growth according to Natural Resource Endowment and Level of Social Fragmentation

Natural resource typeExtractive Agricultural Other

April 18, 2023 27

Model: Time series cross sectionDependent variable: growth of real per capita income

Independent variable (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Natural resource typeExtractive -0.027 *** -0.025 *** -0.007 0.003 0.003 -0.016 ** -0.015 * 0.002 0.009 0.010

(0.008) (0.008) (0.011) (0.010) (0.010) (0.008) (0.008) (0.011) (0.010) (0.010)

Agricultural -0.020 ** -0.019 ** -0.026 *** -0.007 -0.005 -0.010 -0.011 -0.017 ** -0.001 0.002(0.008) (0.008) (0.007) (0.009) (0.008) (0.009) (0.009) (0.008) (0.010) (0.009)

Poor -0.008 -0.008 -0.010 ** -0.002 -0.003 0.002 -0.0001 -0.004 0.002 0.004(0.006) (0.005) (0.005) (0.008) (0.007) (0.006) (0.006) (0.006) (0.008) (0.007)

Fractionalization -0.020 ** -0.019*** -0.020

*** -0.016 -0.025 ** -0.026

*** -0.025

*** -0.018

(0.009) (0.002) (0.001) (0.012) (0.010) (0.003) (0.002) (0.013)

in extractive -0.047 *** -0.037 *** -0.042 *** -0.043 *** -0.032 *** -0.039 ***(0.009) (0.010) (0.008) (0.008) (0.009) (0.009)

in agricultural 0.019 0.008 0.018 0.011(0.015) (0.020) (0.013) (0.019)

in poor 0.005 0.002 0.012 0.008(0.017) (0.015) (0.018) (0.017)

Regional dummy variablesSub-Saharan Africa -0.017 *** -0.016 *** -0.020 *** -0.019 ***

(0.002) (0.001) (0.002) (0.002)

Latin America -0.018 *** -0.019 *** -0.017 *** -0.018 ***(0.005) (0.005) (0.006) (0.006)

R20.16 0.17 0.20 0.26 0.26 0.12 0.14 0.17 0.24 0.24

Adj. R20.15 0.15 0.18 0.23 0.24 0.11 0.13 0.15 0.21 0.22

Countries 95 93 93 93 93 95 93 93 93 93N 342 334 334 334 334 342 334 334 334 334

* Statistically significant at 10% level ** Statistically significant at 5% level *** Statistically significant at 1% level.

Table 7 Natural Resource Endowment, Absence of Social Cohesion and Growth

Note: White heteroskedasticity consistent standard errors in parentheses. See appendix 3, section A3.3 for variable definitions. Regressions (1)-(5) include constant, initial income and its square, initial human capital. Regressions (6)-(10) include same variables with the exception of initial income square.

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Model: Period SURDependent variable: growth of real per capita incomeIndependent variable (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Natural resource typeExtractive -0.034 *** -0.032 *** -0.010 0.001 0.001 -0.024 *** -0.023 *** -0.001 0.007 0.008

(0.006) (0.006) (0.009) (0.010) (0.009) (0.006) (0.005) (0.009) (0.010) (0.009)

Agricultural -0.026 *** -0.025 *** -0.031 *** -0.015 -0.014 ** -0.017 *** -0.018 *** -0.023 *** -0.010 -0.008(0.006) (0.005) (0.007) (0.009) (0.007) (0.005) (0.005) (0.007) (0.009) (0.007)

Poor -0.017 *** -0.018 *** -0.020 *** -0.012 -0.012 ** -0.007 -0.010 * -0.014 * -0.008 -0.006(0.005) (0.005) (0.007) (0.007) (0.006) (0.005) (0.005) (0.007) (0.007) (0.005)

Fractionalization -0.022 ** -0.018 -0.017 -0.016 * -0.027 *** -0.027 -0.025 -0.018 *(0.006) (0.018) (0.017) (0.009) (0.008) (0.018) (0.017) (0.009)

in extractive -0.056 *** -0.051 * -0.053 *** -0.054 * -0.045 * -0.053 ***(0.025) (0.025) (0.018) (0.026) (0.025) (0.019)

in agricultural 0.012 0.003 0.014 0.010(0.022) (0.022) (0.023) (0.022)

in poor 0.005 0.002 0.014 0.011(0.023) (0.022) (0.023) (0.022)

Regional dummy variables

Sub-Saharan Africa -0.019 *** -0.019 *** -0.022 *** -0.022 ***(0.05) (0.005) (0.005) (0.005)

Latin America -0.017 *** -0.017 *** -0.015 *** -0.015 ***(0.05) (0.005) (0.005) (0.005)

R20.29 0.32 0.34 0.37 0.37 0.21 0.26 0.28 0.32 0.32

Adj. R20.28 0.31 0.32 0.35 0.35 0.20 0.24 0.26 0.30 0.31

Countries 95 93 93 93 93 93 93 93 93 93N 342 334 334 334 334 334 334 334 334 334

* Statistically significant at 10% level ** Statistically significant at 5% level *** Statistically significant at 1% level.

Table 8 Natural Resource Endowment, Absence of Social Cohesion and Growth

Note: White heteroskedasticity consistent standard errors in parentheses. See appendix 3, section A3.3 for variable definitions.

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Model: Period SUR Dependent variable: growth of real per capita incomeIndependent variable (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

Natural resource typeExtractive -0.021 *** -0.019 *** -0.017 *** 0.001 0.008 0.008 -0.014 ** -0.017 *** -0.015 *** 0.004 0.010 0.010

(0.006) (0.004) (0.004) (0.008) (0.008) (0.007) (0.005) (0.004) (0.004) (0.008) (0.008) (0.007)

Agricultural -0.014 ** -0.012 *** -0.012 *** -0.017 *** -0.004 -0.004 -0.008 -0.011 *** -0.011 *** -0.015 ** -0.004 -0.005(0.006) (0.003) (0.003) (0.006) (0.007) (0.004) (0.005) (0.003) (0.003) (0.006) (0.007) (0.004)

Poor -0.003 0.004(0.006) (0.005)

Fractionalization -0.021 *** -0.017 * -0.017 * -0.018 ** -0.024 *** -0.018 * -0.017 * -0.018 **(0.008) (0.010) (0.009) (0.008) (0.008) (0.010) (0.009) (0.008)

in extractive -0.044 ** -0.044 ** -0.044 * -0.049 ** -0.047 ** -0.046 ***(0.019) (0.018) (0.017) (0.019) (0.018) (0.017)

in agricultural 0.013 -0.001 0.008 -0.002(0.015) (0.015) (0.015) (0.015)

Regional dummy variablesSub-Saharan Africa -0.015 *** -0.015 *** -0.016 *** -0.016 ***

(0.005) (0.005) (0.005) (0.005)

Latin America -0.017 *** -0.017 *** -0.015 *** -0.015 ***(0.004) (0.004) (0.004) (0.004)

R20.47 0.47 0.50 0.49 0.50 0.50 0.45 0.45 0.48 0.48 0.49 0.49

Adj. R20.46 0.46 0.48 0.48 0.48 0.49 0.43 0.44 0.47 0.46 0.47 0.47

Countries 95 95 93 93 93 93 95 93 93 93 93 93N 342 342 334 334 334 334 342 334 334 334 334 334

* Statistically significant at 10% level ** Statistically significant at 5% level *** Statistically significant at 1% level.

Table 9 Robustness regressions: Easterly and Levine (1997)

Note: White heteroskedasticity consistent standard errors in parentheses. In addition to initial income and its square (1-6) and initial human capital, regressions include decadal dummies. See appendix 3, section A3.3 for variable definitions.

April 18, 2023 30

Model: OLSDependent variable: GEA 7090

Independent variableSachs and Warner (1997)

Barro (1991)

MRW (1992))

King and Levine (1993)

DeLong and Summers (1993)

Fractionalization in extractive economies -1.93 *** -3.47 *** -1.92 *** -1.53 ** -2.56 **

(0.528) (0.892) (0.587) (0.700) (1.061)

R2 0.80 0.58 0.50 0.32 0.38

Adj. R2 0.77 0.51 0.48 0.28 0.32Countries 69 66 84 58 54

Improvement from original specification

R2 0.04 0.14 0.06 0.05 0.11

Adj. R2 0.03 0.15 0.06 0.04 0.10Change in N -1 -1 -2 -10 0

* Statistically significant at 10% level *** Statistically significant at 5% level *** Statistically significant at 1% level.

Table 10 Robustness Regression Results Summarized

Note: White heteroskedasticity consistent standard errors in parentheses. See appendix section A4 varible definitions and sources.

April 18, 2023 31

Table 4. Estimated Growth Effects of Fractionalization

Model: TSCS Fixed effects Period SUR Random effects EL SUR

Fractionalization in Extractive

St.dev below mean -0.3 -0.4 -0.4 -0.4 -0.4

Mean -1.1 -1.4 -1.2 -1.2 -1.2

St.dev above mean -1.7 -2.2 -1.9 -1.8 -1.8

Fractionalization

St.dev below mean -0.2 -0.1 -0.2 -0.2 -0.2

Mean -0.5 -0.4 -0.6 -0.6 -0.6

St.dev above mean -0.8 -0.7 -1.0 -0.9 -0.9

Fractionalization (without extractive interaction)

St.dev below mean -0.2 -0.2 -0.2 -0.3 -0.3

Mean -0.7 -0.6 -0.8 -0.9 -0.9

St.dev above mean -1.1 -0.9 -1.2 -1.5 -1.5

Note: Estimated coefficients not signifincant at standard levels in italics.

Table from Perälä (2007)-Resource Flow Concentration…

Estimated Growth Effects of Enclave Effect

April 18, 2023 32

Concluding remarks• Broadens the debate on natural resource abundance and growth to

type of natural resource & the ensuing political economy considerations

• Mineral and/or oil richness combined with lack of social cohesion is found consistently negatively correlated with growth (distinct growth experience from agricultural economies)

• Brings forth evidence that mere natural resource richness is not negatively correlated with growth (rather, coexistence with lack of social cohesion important for a negative growth outcome)

• Empirical results are useful in explaining the cause of resource curse, highlighting the importance of political economy aspects

• The challenge is especially predominant in small economies, with smaller domestic market, greater challenge for manufacturing developing, more reliance on external markets and greater cost challenge for the management of the fiscal linkage.

April 18, 2023 33

Other related contributions:• Perälä, Maiju Johanna. 2007. Explaining Growth Failures:

Does the Type of Natural Resource Endowment Matter? (paper in review)

• Perälä, Maiju Johanna. 2007. Resource Flow Concentration and Social Fractionalization: A Recipe for Curse? Journal of Economic Studies, 35(5), forthcoming

• Perälä, Maiju. 2003. Persistence of Growth Failures: Does the Type of Natural Resource Endowment Matter? UNU/WIDER Discussion Paper #37.

• Perälä, Maiju Johanna. 2002. Explaining Growth Failures: An Empirical Investigation of Natural Resource Type and Growth. In Essays on Economic Development and Growth, 124-186, University of Notre Dame dissertation.