The Political Economy of King Midas: Resource Abundance and Economic Growth
Parts of the world have been blessed with plentiful fertile valleys, rich fishing banks, diamond mines and vast oil reserves. Paradoxically, such resource-rich countries underperformed in terms of economic growth compared to their resource-scarce counterparts over the last four decades; a phenomenon that became known as the "resource curse" hypothesis. The present study aims to contribute to a deeper understanding of the interplay between economic growth and resource abundance. The first part of the study probes into investigating novel theoretical mechanisms that elucidate the "resource curse" paradox, such as the contractionary impact of resource rents on savings, investment and innovation. The second part of the study explores empirically the relative importance of such explanations of the hypothesis across countries and U.S. states.