Numerous studies have confirmed a statistically significant negative relationship between natural resource abundance and economic growth. This has been labeled “The Resource Curse”. In this paper we try to explain why Botswana, a country heavily dependent on its diamond industry, has managed to generate sustainable growth. Economists have advanced several explanations for the negative impact of natural resources on long-term growth. This paper focuses on the following important problems: First, a boom in a natural resource can pull resources away from other sectors of the economy, thus harming their international competitiveness, a phenomenon called the Dutch disease. Second, abundance in natural resources may lead to poor institutional quality in many countries. Thanks to conservative fiscal policies and accumulation of foreign reserves the local currency did not appreciate during the boom, and Botswana avoided the most severe symptoms of the Dutch disease. Historical tradition of democratic procedures and sound institutions at the time of diamond discovery has contributed to a high institutional quality in Botswana.
2. THE THEORY OF THE CURSE OF NATURAL RESOURCES
2.1 THE DUTCH DISEASE
2.1.1 The symptoms of the Dutch disease
2.1.2 Avoiding the Dutch disease
2.2 INSTITUTIONAL QUALITY, CORRUPTION AND NEGLECT OF EDUCATION
3. HOW BOTSWANA BEAT THE RESOURCE CURSE
3.1 THE DUTCH DISEASE IN BOTSWANA
3.1.1 To what extent did Botswana suffer from the Dutch disease?
3.1.2 What did Botswana do to prevent Dutch disease effects?
3.2 INSTITUTIONAL QUALITY, CORRUPTION AND NEGLECT OF EDUCATION
4. EXPLAINING THE SUCCESS OF BOTSWANA
4.1 AVOIDING THE DUTCH DISEASE
4.2 BOTSWANA’S HIGH INSTITUTIONAL QUALITY
5. FINAL DISCUSSION
Author: Hilldén, Joakim,Mesterton, Johan
Source: Uppsala University Library
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