Minerals, Institutions, Openness, and Growth: An Empirical Analysis

Abstract

Competing explanations of the resource curse are tested using panel data. The data support the existence of a mineral resource curse for developing countries with weak institutions, consistent with the hypothesis that owners of mineral resources use weak institutions and openness to trade to stifle the development of human capital, to the detriment of growth in other sectors of the economy. Manufacturing imports substitute for the development of domestic production, so openness to trade correlates with lower growth in mineral dependent economies. The Dutch disease and debt overhang explanations of the resource curse are not supported. (JEL O11, Q32)