resource curse

Analysis of Angola: Probability of Falling Victim to the Resource Curse

angola2A research paper by Thunderbird students Christian Lorentzen and Anthony Petrunin

Executive Summary: To determine whether Angola is at risk of falling victim to the resource curse we chose to implement a framework developed by Paul Stevens and Evelyn Dietsche (Stevens and Dietsche, 2008) based on their careful study of leading academic writings on causes of the resource curse. The framework employs three main factors to determine whether a country is likely to experience the resource curse:
1) Is there the existence of historic well-functioning institutions already in place?•Considering that Angola’s present leadership came to power through a civil war in which the institutions left by the Portuguese were destroyed and new centralized systems were created, there is risk that Angola’s leadership is not dependent on a system that would lead them to make decisions in the best interest of the country.
2) Is the relative value of the resource rent high or low?•Angola is dependent on high-rent oil exports. The oil royalties are high enough to satisfy the national budget without the necessity of additional revenue streams. As a result the leaders lack motivation and incentive to develop other sectors of the economy.
3) Is the natural resource harvested across large or small geographic areas?•Oil has a small geographical footprint that does not require local support systems or labor. Therefore Angola’s dependence on oil is unlikely to create cluster economies.
By analyzing these three questions in the context of modern day Angola, we came to the conclusion that Angola is at a high risk of becoming a resource cursed country.

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