Social and Behavioral Sciences Commons^™

The Curse Of Windfall Income: How Foreign Aid And Natural Resource Dependence Constrains Growth, Adams Bailey Nager

All Theses and Dissertations (ETDs)

Literature exists on two ‘curses,’ the natural resource curse and the curse of foreign aid, which limit growth in developing nations. At their core, both the natural resources curse and the curse of aid derive from the same root cause- the curse of windfall income. The windfall curse is a macroeconomic side-effect that negates the positive effects of unearned capital by raising domestic prices and lowering competitiveness. While windfall income creates growth in a countries service sector, it represses growth in the manufacturing sector. These trends help explain the inability of both foreign aid and natural resources to fuel sustained …