The (Potential) Curse of Abundant Natural Resources

An Examination of Oil-Rich Nations

Abstract

This research investigates the resource curse theory in countries with natural oil reserves from an economic perspective. The resource curse theory suggests that resource-rich countries often experience paradoxically slow economic growth; however, this study explores instances where the theory holds true and cases where it does not, aiming to identify factors that influence these divergent outcomes. This study analyzes components that affect global GDP growth, applying linear regression to integrate economic findings with social and political contexts to assess future implications and potential solutions to the resource curse. Data for economic outcomes, including GDP and resource availability, was obtained from OPEC, OECD, The World Bank, and the International Monetary Fund. This research is particularly relevant in light of ongoing global economic challenges, including the correlation between oil production, economic inequality, authoritarianism, and institutional effectiveness, and the impact of rising oil prices over the past four years. This study finds that in politically stable and economically diverse nations, abundant oil reserves do not cast a ‘curse’ on the nation’s development outcomes. For nations that rely solely on oil and have weaker political institutional strength, the ‘curse’ of oil or other abundant natural resources can be manifest. The various factors determining these factors are discussed in greater detail throughout the paper.