Natural Resources and Welfare

This chapter examines the link between natural resource intensity and welfare for U.S. states from 1980 through 2009. Previous literature has examined the relationship between resource abundance and economic growth and, ultimately, the existence of a resource curse. The vast majority of these studies have utilized international data sets and focused strictly on economic growth. This chapter utilizes a sub-national data set of U.S. states and focuses on the impact of resources on welfare and development as measured by seven indicators. The findings show a negative relationship between natural resource intensity and welfare. After disaggregating resources into point or diffuse sources, it is found that point resources are likely to be more detrimental to welfare. Two prominent transmission channels of the resource curse, education and rent seeking, are examined and are found to have significant relationships with resource intensity. Finally, Seemingly Unrelated Regression (SUR) estimation is used to explicitly identify the direct and indirect effects of resources on welfare.