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June 12, 2017

The resource curse in action

An alluvial diamond mine in the desert of southern Namibia.

Oleg Znamenskiy/Bigstock

Surging demand for raw materials from fast-growing countries like India and China during the 2000s was welcome news for mineral-rich African countries. The resulting commodities boom was partially responsible for a strong decade of growth across the continent. But new research indicates that even as Africa’s economy was booming, it was also afflicted with a “resource curse.”

In a study appearing in this month’s issue of the American Economic Review, the authors look at geocoded data on violent incidents and note the proximity of each incident to mining clusters. In theory, productive mines could potentially lead to violence for a number of reasons – profitable mines are a natural target for warring factions, and a captured mine can provide financial support to a rebel group looking to expand its reach.

The researchers find that rising commodity prices did lead to greater violence, especially near sites where the profitable minerals like platinum and nickel were being extracted. The map below indicates regions where conflict would have been less likely to occur in 2010 if commodity prices had remained at their lower 1990s levels.

Figure A.5 from the online appendix to Berman et al. (2017)

The effect of price increases on violence wasn’t uniform though – the link between commodity prices and conflict was stronger in countries with more corrupt institutions and more religious fractionalization.

“For every Norway and Qatar that does well with natural resources, there is also an Angola or Sierra Leone,” said Mathias Thoenig, an economist at the University of Lausanne and one of the authors of study. “The current opinion of the profession is that you may turn the resource curse into a blessing if you have the appropriate institutions.”