ABSTRACT

The commodity boom that started at the turn of the Millennium may not usher a complete reversal of the Singer-Prebisch thesis. Yet, in a new era of relative resource scarcity, the terms of trade of resource-rich developing countries have started to improve in the face of booming commodity prices and cheaper manufactured goods from emerging economies. The rush on extractive resources increased the number of resource-dependent countries in the developing world, offering an exceptional opportunity to mobilize extractive revenues for development in new oil and mining eldorados, but also raising resource-curse risks. In this paper, we have examined the dynamic relationship between extractive resource

dependence, armed violence, and sustainable development in a panel covering 104 developing countries over the recent commodity price boom period. Our results clearly support the resource-curse argument when looking at sustainable development outcomes as measured by ANS per capita. This is not surprising to the extent that, ceteris paribus, natural capital depletion reduces genuine savings. Nonetheless, we further find that resource dependence negatively affects human capital as well: resource-dependent countries tend to have lower education expenditures per capita during the short period under review. This is aggravated by the fact that resource dependence tends to be associated with a

higher probability of armed conflicts and higher homicide rates, both of which have a significant negative impact on ANS per capita. In a first attempt to quantify the impact of armed violence, beyond armed conflict, on development outcomes, we show that higher homicide rates do not appear to affect education expenditures. Hence, future research on the transmission channels from increased violence to reduced ANS could explore the impact of armed conflict and violence on physical capital and institutions, which has not been governments who fail to appropriately re-invest the windfalls