Environmental Engineering Reference
In-Depth Information
1998; 1999; Torvik, 2002). In short, natural resource abundance, windfall commodity
price booms and the discovery of valuable new reserves can all encourage private agents
to compete vigorously for the increased resource rents, and in states with weak political
and legal institutions, governments are overwhelmed by the special interest pressures of
rent-seekers, thus leading to distorted economic and resource management policies that
favor the rent-seekers and generate problems of corruption, institutional breakdown and
of course dissipation of resource rents. Certain types of natural resource endowments
may generate these opportunities for rent-seeking behavior and corruption. For instance,
several studies suggest that this is the case for 'point resources', which include energy and
mineral resources as well as timber forests (Auty, 2001; Bulte et al., 2005; Karl, 1997; Leite
and Weidmann, 1999; Ross, 1999).
If 'bad' policies and institutions lie at the heart of translating resource abundance and
windfall gains into negative economy-wide e
ects, then 'good' policies and institutions
may explain why some developing economies with resource wealth may have avoided
the 'resource curse'. However, judging by available empirical evidence, very few resource-
dependent developing economies have achieved such success. For example, Gylfason (2001,
p. 566) examined the long-run growth performance of 85 economies and concluded:
ff
Of this entire group there are only four resource-rich countries which managed to achieve (a)
long-term investment exceeding 25% of GDP on average in 1965-1998, equal to that of various
successful industrial states lacking raw materials, and (b) per capita economic growth exceeding
4% per year on average during the same period . . . These countries are Botswana, Indonesia,
Malaysia and Thailand. The three Asian countries achieved this success by diversifying their
economies and by industrializing; Botswana without doing so.
6
The 'stylized facts' of resource use in developing countries
While the concern about resource dependence and the poor economic growth perfor-
mance in modern developing economies may be justi
ed, to understand more fully the
relationship between trade, natural resources and long-run development it is necessary to
understand further some of the key structural features, or 'stylized facts', of natural
resource use in these economies. As outlined by Barbier (2005), four such 'stylized' facts
can be identi
fi
fi
ed:
1.
The majority of low- and middle-income countries (LMICs) are highly dependent
on primary product exports.
2.
Resource dependence - usually measured as primary product exports as a share of
total exports - in LMICs is associated with poor economic performance.
3.
Development in LMICs is associated with increased land conversion.
4.
A signi
fi
cant share of the population in LMICs is concentrated in 'fragile' lands.
The problem with all the 'resource curse' explanations of the possible negative impacts of
resource dependence on trade and long-run devleopment is that such explanations
address the
rst two stylized facts, but not the third and fourth. The latter are worth exam-
ining further.
As stylized fact 3 indicates, in all LMICs, expansion of this agricultural land base is
occurring rapidly through conversion of forests, wetlands and other natural habitat
(Chomitz et al., 2007; FAO, 1995; 2001; Fischer and Heilig, 1997). This trend for greater
fi
