Rethinking economic policies: diversification and governance strategies to address the resource curse in mineral-rich economies

Abstract

The “resource curse,” in which countries rich in specific minerals stagnate economically, is prevalent. This paradox occurs when weak governance, corruption, and overreliance on resource rents limit innovation and variety. To address this issue, this study examines the top 20 natural resource-rich economies and how economic diversification, governance, and development policies have affected resource management from 2000 to 2022. Regulatory quality and corruption control were used to study how governance affects mining mineral resource rents. For “mining governance,” the research examined how resource-rich states develop mineral resource rents and how good governance, including effective laws and corruption control, affects this process. Panel fixed-effects results show that regulatory inefficiency and corruption due to inadequate mining governance worsen the resource curse. However, economic growth and human capital development improve mineral resource governance by increasing workforce knowledge and productivity. High tariffs hinder resource utilization and economic diversification, such as ICT exports and value-added manufacturing. The study concluded that improving institutional capabilities and ensuring sustainable natural resource management boost economic resilience and growth.