The ‘Resource Curse’ and regional US development

Abstract

The ‘Resource Curse’ is a stylized fact that has been observed consistently in a number of development studies: countries that are relatively well-endowed with natural resources tend to grow more slowly than resource-poor economies. This article documents evidence that the Resource Curse extends to the individual states of the US Using a variety of specifications, regression of state GSP growth on resource intensity consistently shows a negative and significant relationship. There is evidence that crowding out of the manufacturing sector may contribute to the slower growth of resource-based economies.

Notes

¹ Including legal traditions, diversity of languages, geographic characteristics and many others; see, for example, Acemoglu, et al. (2001).

² Here ‘natural resources’ or simply ‘resources’ are defined to be agriculture and mining, which includes oil and gas extraction.

³ 

⁴ The instrumental variable regression can be accomplished in either one or two steps; we use the two-step method here. See Arellano and Bond (1991) for details and methodology.