Advances in Measuring Sustainable Development
5. Resources, growth and the ‘paradox of plenty’ INTRODUCTION1 The re-emergence of interest in the determinants of economic growth has provided a reminder that a range of policy-related variables can have a persistent inﬂuence on economic growth rates. Parallel contributions to the theory and measurement of sustainability have focused on the implications of imprudent use of natural resources and inefﬁcient levels of environmental degradation for sustaining economic development. One important link between these two questions is the paradoxical but seemingly robust ﬁnding of a negative and signiﬁcant relationship between natural resource and the growth rate of per capita gross domestic product (GDP). This ﬁnding has been characterized as conﬁrming the ‘resource curse hypothesis’ or ‘paradox of plenty’. Not surprisingly, there has been considerable effort expended to understand why the resource curse arises and, more importantly, whether it can be avoided. The focus of this book on sustainability would suggest that the problem might lie in the mismanagement of the portfolio of assets of resource-abundant countries. That is, in practice, it appears that the prudent path of saving resource rents has been difﬁcult to achieve. In this chapter, we explore further the links between some of those factors said to be important to understanding sustainability and the resource curse hypothesis. Using simple cross-country growth regressions, we examine this relationship using a direct measure of natural resource abundance: the share of resource rents in GDP for a range of natural resources including energy and mineral and timber...
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