Natural Resources and State Fragility

This paper provides an overview of the relationships between natural resources, governance, and economic performance. The relationships run in both directions, with re-sources potentially altering the quality of governance, and governance being particularly important for resource poor countries. Both these relationships have threshold effects; if governance quality is above a certain level, then natural resources can lead to further improvement, while, below the threshold, further deterioration may take place. Theoretical and empirical work is reviewed, the interactions between the relationships discussed, and policy implications outlined.

Paper prepared for the Conference on “Financial markets, adverse shocks and policy responses in fragile countries”, organised by the European Report of Development in Accra, Ghana, 21-23 May, 2009.

European Report on Development 2009

Supported by the European Commission and seven Member States (Finland, France, Germany, Luxembourg, Spain, Sweden and the United Kingdom), the European Report on Development (ERD) is the main output of the "Mobilising European Research for Development Policies" initiative. This flagship report is published since 2009, with the aim of stimulating debate and research on topics of major relevance for development, as well as to enhance the European perspective in the international development arena.