What does the Resource Curse refer to?

• A. Resource wealth tends to make countries more innovative and democratic
• B. Resource wealth leads to lower corruption and more democracy
• C. Resource wealth correlates with lower growth
• D. Resource wealth tends to be associated with less innovation, higher corruption, and autocratic governance

Answer: (D)

Resource wealth can paradoxically hinder development in many cases, a pattern known as the Resource Curse. When a country has abundant natural-resource revenues, governments may rely on those rents instead of broad tax bases or diversified economic activity. This often weakens incentives to build strong institutions, promote competition, or diversify the economy. Rent-seeking and corruption can rise as powerful actors try to capture resource rents, and political leaders may consolidate power to manage these revenues, fostering autocratic governance. The revenue windfall also tends to make the economy more vulnerable to commodity price swings and can dampen innovation and growth in other sectors, a phenomenon sometimes called Dutch disease. Taken together, resource wealth is frequently linked to less innovation, higher corruption, and autocratic governance, which is why this description best fits the Resource Curse.