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The Presource Curse
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The Presource Curse

Oil discoveries can lead first to jubilation then to economic jeopardy

James Cust and David Mihalyi
IMF, 2017
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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Concrete Examples

Recommendation

Contrary to expectations, growth in some economies falls after an oil or gas discovery. Economists James Cust and David Mihalyi explore the reasons for such failures and outline what officials can do to prevent them. getAbstract recommends this notable research to bankers and investors considering doing business in resource-rich countries that may lack the political and governing vigor to make those discoveries a blessing and not a curse.

Take-Aways

  • Discoveries of large oil and gas reserves should lift the economic fortunes of the countries that own them.
  • However, the term “presource curse” describes the weak political structures, poor planning and feeble development that can make nations immune to the benefits of a natural resource find.
  • The presource curse takes hold if a nation falls prey to excessive optimism in the period between resource discovery and the start of production.

About the Authors

James Cust is an economist at the World Bank. David Mihalyi is an economist at the Natural Resource Governance Institute.

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