Natural Resource Abundance

Introduction

Natural resource abundance in endowed countries previously has been considered as positive factor for economic growth. Facing with several economic, politics and social

Review of Literature

Natural Resources in recent decades have had considerable effect on economic literature in connection to economic performance (especially growth), regime type, inequality, poverty, and civil war. In affecting natural resource on economic development Andrew Rosser (2006) pointed out that prior to the late 1980s, the common sense concerning the relationship between natural resource abundance and development was that the former was helpful for the latter. Sandbu (2005) has reported that the past decade witnessed a resurgence of empirical research on natural resource.

In the end of 1980s and early 1990s there has emerged an ample of academic research that challenged this conventional wisdom. Rather than a blessing, this literature has pointed out that natural resource abundance increases the likelihood that countries will experience negative economic, political and social outcomes (Davis et.al 2003, Ross 2001and 2003, Collier and Goderis, 2007.).

An influential study by Sachs and Warner (1995) showed that countries’ rates of economic growth in the 1970 and 1980s were strongly and negatively affected by their natural resource dependence. According to Pomfret (2006), oil-producing regions seem to have not experienced any sustained employment growth and furthermore, poverty and inequality remain worse in oil-producing regions than in non-oil regions. Schubert (2006) has pointed out that oil dependent states have performed 1.7 percent worse in terms of economic growth than non-oil states in recent years. Most oil countries ...

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... curse is an undeniable problem in a majority of countries with point resources, like oil, and in spite of huge evidence in favour of this theory, the problems are not related to the resource abundance but rather the resource dependence is related to their institutions as in the case of Iran. A plausible assert provided by Thomas Brambor (2008),

Contrary to claims in the literature that institutions are the result of resource abundance, we propose to view the quality of pre-existing institutions as the origin of natural resource dependence. Natural resource abundance translates into natural resource dependence only in the presence of poor institutions.

Further research on the structure of political, economical and cultural aspects of institutions is needed to explain how the structure and function of institutions in Iran lead to the economic dependence on oil.