Abstract for: Blessing or Burden? Another Look at the Natural Resource Curse
The hypothesis of a negative correlation between economic growth and the natural resources endowment is called "curse of resources." So far, many econometric studies have tested this hypothesis, but without any decisive conclusion, mainly due to the dynamic complexity of the problem. This paper presents a theoretical system dynamics model to address the fundamental question of whether the natural resources endowment is "curse" or "blessings". The simulation results of the model reveal that the probability that the resource wealth will lead to low economic growth rates thus socioeconomic underdevelopment is negligible. This probability is stronger in the short term rather than in the long run. Another finding is that weak social and political institutions can increase the negative effects of natural resource wealth. Finally, it is shown that similar to ordinary goods or personal income, revenues from resource exports follow the law of diminishing marginal utility.