Escaping from the Resource Curse: Evidence from Botswana and the Rest of the World

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Abstract: It is commonly accepted that resource-rich economies tend to fail in accelerating growth because of various adverse effects of abundant natural resources, such as Dutch disease and rent seeking. Using the latest cross-country data, this study empirically readdresses the question of whether resource abundance can contribute to growth. It finds that governance determines the extent to which the growth effects of resource wealth can materialize. In developing countries in particular, the quality of regulation, such as the predictability of changes of regulations, and anticorruption policies, such as transparency and accountability in the public sector, are most important for effective natural resource management and growth. The paper also attempts to interpret the theme and results in the context of Botswana, which is endowed with abundant natural resources but has experienced the most remarkable economic performance in the region. [JEL C31; O13; O21; Q32]