• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Discuss Colliers view of the natural resource trap that countries that are rich in natural resources are less developed than those that are not so well endowed (20 marks)

Extracts from this document...

Introduction

Sam Larlham 13AMA F585: Development Economics Discuss Collier?s view of the ?natural resource trap? that countries that are rich in natural resources are less developed than those that are not so well endowed (20 marks) The natural resource trap is an idea proposed by Paul Collier, a development economist, in his book The Bottom Billion. The paradoxical suggestion that countries rich in natural resources are less developed than those that are not is one of great debate, where many variables must be considered. One factor that supports Collier?s view is to do with government revenue. In many developing economies, there is a high level of government planning and as such, many natural resource exporting companies are nationalised. ...read more.

Middle

This can cause issues with corruption, or mean that fiscal spending is not used in a way that derives maximum benefit for the country, for example by choosing not to improve the education and healthcare systems. This in turn can harm human development, as average life expectancy and mean years of schooling will be low. This can have economic consequences due to a reduced labour force and lower quality of labour respectively, therefore a lack of taxation suggests Collier?s view is correct. The second issue of the Natural Resource Trap is that of ?Dutch Disease?. High export revenues generated by natural resources lead to a current account and balance of payments surplus. The result of this is an appreciation in the country?s exchange rate, as there is a greater demand for the currency. ...read more.

Conclusion

This would cause a drop in real GDP, meaning that a country?s economic development suffers. This also supports Collier?s View. The previous two factors link to the third issue with the Natural Resource Trap, which is that of primary sector dependency. The fact that the government can generate large revenue from natural resources means that they are more likely to invest in this industry. This would cause natural resources? proportion of total export revenue to grow, as the market is expanding relative to others, meaning that the economy is more dependent on these commodities. This is then compounded by the lost international competitiveness in other sectors, which causes there share of total export revenue to fall. The problem with this is that natural resources a subject to a high level of price volatility ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level UK, European & Global Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level UK, European & Global Economics essays

  1. This investigation will try to test the level of external debt and measure its ...

    these same creditors are contributors to the government, and then it can be said that "the country has a debt with itself". The external debt is constituted by the liabilities a country maintains externally, with an original maturity or a prorogation of a year or more, payable in foreign currency.

  2. Why has GDP growth been so slow in Somalia?

    Economic Causes of Civil Conflict and their Implications for Policy. Available: http://users.ox.ac.uk/~econpco/research/pdfs/EconomicCausesofCivilConflict-ImplicationsforPolicy.pdf 42 Central Intelligence Agency. (2011). Africa: Somalia. Available: https://www.cia.gov/library/publications/the-world-factbook/geos/so.html 43 Paul Collier. (2006). Economic Causes of Civil Conflict and their Implications for Policy. Available: http://users.ox.ac.uk/~econpco/research/pdfs/EconomicCausesofCivilConflict-ImplicationsforPolicy.pdf 44 Jeff Haynes.

  1. Evaluate the view that 'unfair terms of trade' are the primary cause of poverty ...

    As shown in the table below, the UK and US have had success in their invisible trading experiences. Mean annual trading balances (Global Challenge A2 Level Geo) The Global Triad A large proportion of global production, trade and investment are concentrated in three regions: Europe, North America and East Asia.

  2. Where does the World Trade Organisation fit in the overall scheme of international public ...

    tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. Product coverage shall be comprehensive and without a priori exclusions". Developing and least-developed countries will have special treatment, "including through less than full reciprocity in reduction commitments."88 The key to progress

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work