Does Oil and Gas Wealth Eat Up Total Wealth? Analyzing the Resource Curse with Measures of Sustainable Wealth

The findings of empirical studies on the question whether endowments with natural resources are a curse or a blessing are ambiguous. The majority of studies found that resource rich countries grow slower than their resource scarce counterparts (“resource curse”). In recent studies, this negative effect on economic performance has been questioned; the effect of resources seems to depend on how resource wealth is measured. While most of these studies use the growth of GDP, a flow variable, as the dependent variable, we propose to use the growth of real total wealth, a stock variable. By this, the idea of sustainable development is taken into account. Using this measure in a cross-sectional analysis, we find strong evidence of a resource curse for oil and gas rich countries. The higher the share of oil and gas wealth in total wealth per capita in 1995, the worse the growth in total wealth per capita a decade later.