Question number 3

Figure 2 below is generally taken as empirical evidence of the so-called "natural resource curse".

Figure 2

(a) Taking inspiration from Figure 2, what does the term "natural resource curse" stand for in the economic literature?

(b) Outline the various ways through which, according to the economic literature, it can materialise

(c) It is often claimed that good institutions may represent a solution to the natural resource curse and may transform natural resource abundance from being a curse into a blessing. Which institutions, as discussed during lectures, may impede the natural resource curse to take place?

(d) Can institutions be effectively taken as exogenous factors that may favour a proper exploitation of natural resources or are they endogenous to the process of economic development?