Why Countries Rich with Resources can be so Poor and How to Prevent It
A Discussion of “Does Information Break the Political Resource Curse? Experimental Evidence from Mozambique”
It seems logical that a country with no resources would be poor, so it seems puzzling when a country rich in resources is poor.
However, Armand, Coutts, et al. (2020) note the Resource Curse, defined as “a decrease in income following a resource boom,” explains this puzzle. (p. 3431)
This resource curse has been measured as a “cross-country negative relationship between per-capita GDP growth and exports of natural resources.” (p. 3432)
This is significant because we would normally expect an increase in exports to lead to an increase in growth.
First, GDP is the dollar amount of production of a country, and economists consider per capita GDP, GDP divided by the population, as a measure of the standard of living in a country. The percentage rate of growth in GDP per capita is the most commonly used measure of economic growth.
Second, exports are a part of GDP, and therefore GDP rises when exports rise, ceteris paribus. That last favorite phrase of economists means, “as long as nothing changes.”
