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Are natural resources a 'curse' or a 'blessing'? The empirical evidence suggests either outcome is possible. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in non-democratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.

The paper surveys economic and political science literature on resource curse, with a primary focus on the role of institutions. These studies show that resource abundance leads now not so much to macroeconomic risks of Dutch disease as to possible deterioration of the quality of government and political institutions. In particular, cross-country evidence on the impact of rising oil prices on media freedom and quality of corporate governance is discussed.

Many societies face an income gap between rich regions with access to advanced technology and regions that are rich in natural resources but poorer in technology. This "resource curse" can lead to a Kuznets trap, in which economic inequalities between the rich and the poor increase during the process of socioeconomic development. This can also lead to depletion of natural resources, environmental degradation, social instability, and declining socioeconomic development. These problems will jeopardize China's achievements if the current path continues to be pursued without intervention by the government to solve the problems. To mitigate the socioeconomic development gap between western and eastern China, the government implemented its Western Development Program in 2000. However, recent data suggest that this program has instead worsened the resource curse. Because each region has its own unique strengths and weaknesses, China must escape the resource curse by accounting for this difference; in western China, this can be done by improving education, promoting high-tech industry, adjusting its economic strategy to balance regional development, and seeking more sustainable approaches to socioeconomic development.

Are natural resources a "curse" or a "blessing"? The empirical evidence suggests either outcome is possible. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, de-industrialization and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in non-democratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies.

This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.

This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.

This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.

This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.

This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others.