wealth is more or less the same irrespective of how poor or rich a country is. However, the
share of natural capital in total wealth is much higher in poorer countries while the share of
intangible capital in total wealth is substantially higher in richer economies. Interestingly,
richer countries have a substantially higher value of natural capital per capita despite having
lower shares of natural capital in total wealth. The results confirm what we know from the
literature on economic growth that intangible capital is the main engine of growth and wealth.
Richer countries focus relatively more on dynamic sectors such as manufacturing and services,
whereas poorer countries specialize in the more static primary sectors.
Table 4 indicates that the poorer countries rely relatively heavily on land resources
(more than two thirds of natural wealth in low-income countries). In the ten wealthiest
countries only Norway has a natural capital share of more than 3 percent (namely 12 percent).
On the other hand, the bottom ten countries all have shares of natural capital in total wealth
exceeding 30 percent. Table 5 indicates that highly resource rich economies, such as the oil
exporters Nigeria, Venezuela and Algeria, sometimes even have negative shares of intangible
capital in total wealth. This suggests that these countries have extremely low levels of GNI as
their returns on productive and intangible capital are very low and possibly even negative.
Consequently, they have very low total wealth and can sustain only very low levels of
consumption per capita. This is another manifestation of the resource curse.
3. Popular explanations of the natural resource curse
The stylized facts discussed in section 2 suggest that the experiences of resource rich
countries have been very heterogeneous. Some have harnessed their resource wealth to boost
their economic performance and others have done worse. Here we discuss the theoretical
support and evidence where available for a wide range of hypotheses about the effects of
natural resources on the economy and society.2 Section 3.1 puts forward the hypothesis that a
resource bonanza induces appreciation of the real exchange rate, contraction of the traded
sector and expansion of the non-traded sectors and offers some evidence for Brazil on this
hypothesis. Section 3.2 shows that if the traded sector is the engine of growth, a resource
bonanza will lead to a temporary fall in growth. Early cross-country evidence indeed indicates
a negative link between resources and growth. Subsequent panel-data and quasi-experimental
tests of this hypothesis are also discussed. Section 3.3 puts forward the hypothesis that the
resource curse can be turned into a blessing for countries with good institutions and provides
2 Earlier empirical work attempts to identify the potential channels of transmission for the resource
curse by regressing institutional quality, human capital etc. on natural resource dependence only and
calculating the indirect effects of resource dependence on growth from the coefficients of these
intermediate variables on growth (Papyrakis and Gerlagh, 2004; Lay and Mahmoud, 2004), but this
approach suffers from potential omitted variable bias and other econometric problems.