Natural resources: A curse on education spending?

In line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments, this paper aims to address an important blind spot in our understanding of the “resource curse” by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices. Using a large panel dataset of 140 countries covering the period from 1995 to 2009, we find an adverse effect of resource dependence on public education expenditures relative to GDP that is robust to controlling for a range of additional covariates. Furthermore, our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point-source natural resources. These results are of particular importance for the sustainable management of natural resource wealth in developing countries, as they could achieve especially high returns by investing resource revenues in public goods such as education. While this paper underlines the importance of institutions and government accountability, our findings also raise questions on the role of the private sector as a partner in development, as the extractives industry could consider increasing funding for education through Corporate Social Responsibility (CSR) initiatives.