Section 4 presents our empirical model. Section 5 discusses the main results. Section 6 concludes.

# **2 Related literature**

The resource curse relates to the observation that natural-resource-rich countries tend to grow less rapidly than natural-resource-poor countries; or more broadly, that resource-rich countries tend to have worse development outcomes compared with resource-poor countries. This finding is documented in Sachs and Warner’s (1995) seminal paper, as well as in a number of subsequent studies (e.g., Arezki and Van der Ploeg 2011; Gylfason et al. 1999; Mehlum et al. 2006; Sachs and Warner 1997, 2001). Sachs and Warner (1995) use growth in per-capita GDP as the dependent variable, and measure natural resource abundance using the share of primaryproduct exports in GDP. They find that economies with a high ratio of natural resource exports to GDP (in the base year, 1970) tended to grow slowly during the subsequent 20 years.

Ding and Field (2005) suggest a distinction between resource dependence and resource abundance.<sup>6</sup> Exports of primary resources as a share of GDP or of total exports—used in Sachs and Warner (1995) and other studies—is viewed as measuring resource dependence rather than resource abundance. Using the World Bank’s estimates of natural resource capital, Ding and Field measure resource dependence as the share of natural resource capital in total capital, and resource abundance as natural resource capital per capita. Their results indicate that resource endowment has a positive impact on economic growth, whereas resource dependence has a negative impact. Similarly, Brunnschweiler and Bulte (2008) find that resource dependence does not affect growth, while resource abundance positively affects growth.

The previous two studies suggest that the direct impact of resource wealth on growth is not a robust and generalizable phenomenon. However, there exist various ‘indirect’ channels through which natural resource wealth can affect development outcomes. A first negative impact of natural resource wealth relates to the so-called Dutch disease.<sup>7</sup> While earlier studies found no evidence of the Dutch disease in the manufacturing sector (see e.g., Gelb 1988; Spatafora and Warner 1999), more recent empirical evidence has become available. Harding and Venables (2016), using data on 41 resource exporters for 1970–2006, show that a dollar of resource revenue leads to a decrease in non-resource exports by approximately 75 cents and an increase in imports by 25 cents, with the manufacturing sector experiencing the largest crowding-out effect. Similarly, Ismail (2010) finds results indicating that, in oil exporting countries, a 10 per cent oil windfall is on average associated with a 3.4 per cent fall in value added across manufacturing. Evidence of the Dutch disease is also found in Brazil, where oil

> 6 They point out that a resource-abundant country such as the United States is not resource-dependent (i.e. has a small primary sector), while a resource-scarce country such as Burundi can be heavily dependent on primary resources.

> 7 Natural resource exports generate significant foreign reserves, resulting in exchange rate appreciation. Such currency appreciation affects the international competitiveness of the traditional export sectors (agriculture or manufacturing), potentially leading to their shrinking in favour of the natural resource sector and non-tradable sector. This phenomenon is called the ‘Dutch disease’, as the discovery of natural gas in the North Sea caused the manufacturing sector in the Netherlands to decline (see e.g., Ellman 1981).

5