Are Natural Resources a Curse for Developing Countries?

Paradoxically, for developing countries the abundance of natural resources can be a curse. With the lack of property rights protection and rule of law, natural resource abundance contributes to political instability, conflict, and corruption. From the perspective of international trade they can cause the so called ‘Dutch disease,’ whereby a natural resource discovery triggers exchange rate appreciation, and its adverse consequences for industrialization and growth. In addition, price volatility in world markets creates macroeconomic instability for resource exporters. Currently international institutions, the WTO in particular, do not have the adequate apparatus to foster trade agreements that cover natural resources; such agreements could potentially lead to more efficient outcomes.

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