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MENTAL MODEL · M12318

Resource Curse

Resource Curse
BusinessHigh supportEconomics
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

Abundant natural resources often hinder a country's growth and governance due to currency appreciation, rent-seeking, and institutional degradation.

SCAFFOLDING EFFECT

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The resource curse, also known as the paradox of plenty or the poverty paradox, is the hypothesis that countries with an abundance of natural resources (such as fossil fuels and certain minerals) have lower economic growth, lower rates of democracy, or poorer development outcomes than countries with fewer natural resources.

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The resource curse refers to the phenomenon where countries rich in natural resources are more prone to growth slowdowns, institutional weakening, and conflict, because resource booms appreciate the exchange rate (Dutch disease), crowd out other industries, and induce rent-seeking. It reverses the intuition that 'resources are wealth'.

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Resource_curseZH · Explicit
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