DR. CHUNGSHIK MOON: Hi.My name is Chungshik Moon, and I am a lecturer at the Schoolof Politics and International Relations at the AustralianNational University. [Dr. Chungshik Moon, Lecturer]Today, I would like to talk about resource curse,which can be defined as a negative effect of a naturalresource on the economic, social,or political well-being.

DR. CHUNGSHIK MOON [continued]: In fact, resource curse is a very interesting puzzle.We tend to think that natural resources wouldhelp national economy.For example, we can imagine that exporting oilor other valuable minerals increase national income.Then why curse here?Focusing on the economic side, I will briefly

DR. CHUNGSHIK MOON [continued]: discuss a number of different cultural mechanismswhich can explain the negative associationbetween natural resource wealth and economic performance.OK.Let me start with a graph.This is done by Sachs and Warner, 1995 piece,which defined the share of a natural resource export divided

DR. CHUNGSHIK MOON [continued]: by GNP is negatively correlated with economic growth.The x-axis represent the share of primary export,and the y-axis represent the economic growth.We can see that, on average, thereis a negative correlation.Of course, this does not necessarilymean that countries with natural resources

DR. CHUNGSHIK MOON [continued]: always experience economic downturn.But clearly, there is a negative pattern here.Then the remaining question is, why it happens?There are a number of different economic and political theoriesto explain resource curse.I introduce two explanations here.First, it can be explained by so-called Dutch Disease.

DR. CHUNGSHIK MOON [continued]: This theory explains that an increase in revenuefrom natural resources will de-industrializea nation's economy.That is, increasing demand of a certain natural resourcewould appreciate the exchange rate.In other words, make the local currency more expensiveso that it can negatively effect the exports

DR. CHUNGSHIK MOON [continued]: of other industries, including manufacturing one.Thus, this theory is not very suitable for developingcountries, which do not have strong manufacturingindustries.One other interesting argument is that natural resourceabundance makes government less accountable to the societiesthey govern because most of their income

DR. CHUNGSHIK MOON [continued]: come from natural resources, not from tax.Thus, they have little incentive to provide public good, whichis necessary for development.This argument suggests that high rentfrom natural resource in fact distract governmentfrom investing the ability to produce economic growth,

DR. CHUNGSHIK MOON [continued]: because, simply, they do not need to.So far, I have briefly discussed about resource curse,its definition and causal mechanisms.If you are interested in this topic,please start with readings by Michael Ross.Thank you.