Abstract for: The Political Economy of the Resource Curse: An Eclectic Model

Development on the basis of extraction and export of natural resources is a dynamically complex problem. Empirical evidence suggest that while some nations have been successful to translate natural resource wealth into long-term development but many have failed too. This phenomenon is called “natural resource curse” in the literature of development economics. In this paper, a generic, eclectic model is developed to examine the so called “resource curse” hypothesis. The model stands on the shoulder of well-established explanations of natural resource dependency that are available from the literature. The model has gone through a comprehensive list of confidence-building tests. Controlled experimentation through Monte Carlo simulations show that, on the contrary to the current belief, it is unlikely that natural resource wealth be harmful for social welfare. Results also revealed that wage stabilization, facilitation of social mobility, and privatization of natural resource revenues (within certain limits) could help the resource-based development to achieve better outcomes.