BMe Research Grant
Tourists visiting Mexico are often afflicted by the traveler’s diarrhea, a disease also known as the revenge of the last Aztec emperor, Montezuma II. The pirate legend says that before his death Montezuma had cursed the conquistadors with everlasting hunger, pain, and suffering... Although in a way different form, his revenge finally reached out to the Spanish Empire; the absolute superpower of the 1500s ended up as a relatively small and poor country by the end of XIX. century. Instead of bringing a new golden era, the enormous amount of looted treasure from the colonies drove the Empire to fall apart (Drelichman, 2005).
Montezuma’s revenge seems to be persistent: Venezuela, a former colony which now controls over the largest proven oil-reserve of the World, is currently a scarce-economy devastated by hyperinflation and political mismanagement. Moreover, most of the resource abundant countries in the Middle-East, South-America, and Africa are facing similar problems. Although classic theories consider natural wealth as a productive component of capital and associate it with positive growth effects, the disappointing development outcomes tell us a different story (see Figure 1). My research is focused on the paradox of plenty (a.k.a. the resource curse), a concept that aims to explain the counterintuitive impact of natural resources on economic growth and social development.
Put differently, the resource curse only hits the economy if technically appropriate resources (point-source extraction, easy to process, store, and transport) are coupled with low quality institutions (in terms of property rights, freedom of speech, transparency, and accountability). The aim of my “resource game” concept is to test this theory in an experimental setting. Based on a competition between self-interested individual actors, the design features both an economic and a political framework to capture the development outcomes under different institutional conditions. Organized as a turn-based game of sequential decisions, it offers economic actors a choice between rent-seeking and productive activities, whereas a political election mechanism provides scope for endogenous policy-making and controls for the extraction of the resource pool. The experiment yields a time-series of macroeconomic indicators as aggregate measures of individual activities. Results from iterated gameplay under different initial conditions are expected to provide new experimental evidence of the curse and a better understanding of its transmission channels (Szalai, 2020).
Furthermore, in accordance with the classic theory, our investigation of the Dutch disease in Botswana concluded that diamond prices do drive the real appreciation of the pula, causing significant losses in competitiveness and crowding-out in the manufacturing sector. The de-industrializing effect of the diamond boom raises serious concerns as the accessible reserves are expected to deplete by the end of this decade. We suspect that this mechanism hinders diversification in several resource abundant economies, while we also intend to involve more countries into our research (Barczikay et al., 2020).
I was lucky enough to have numerous opportunities to advocate for my/our ideas in international scientific conferences, as well as to instruct guest lectures and academic courses at universities in Hungary, Finland, Mexico, and Spain. Besides Hungarian and Spanish, most of my papers were written in English, including original research articles published in recognized international journals.
Barczikay, T., Biedermann, Z., & Szalai, L. (2020). An investigation of a partial Dutch disease in Botswana. Resources Policy, 67, 101665. DOI:10.1016/j.resourpol.2020.101665
Guillén Tortajada, E., Jiménez Martínez, M. P., Szalai, L., Caballero García, P. A., & Alcaraz Rodríguez, R. E. (2020). Instrument Design and Validation for Measuring Entrepreneurial Competence. Comunicación y Hombre, 16, 193–224. ISSN:1885–365X
Szalai, L. (2011). Paradox of Plenty. In L. Balogh, D. Meyer, & H.-D. Wenzel (Eds.), Analysis of Monetary Institutions and Space (pp. 111–138). Bamberg: BERG-Verlag. ISBN:978-3-931052-94-2
Szalai, L. (2018a). A Review on the Resource Curse. Periodica Polytechnica Social and Management Sciences,26(2), 179–189. DOI:10.3311/PPso.10021
Szalai, L. (2018b). Institutions and Resource-driven Development. World Journal of Applied Economics, 4(1), 39–53. DOI:10.22440/wjae.4.1.3
Szalai, L. (2020). An Experimental Approach to the Resource Curse. In G. Družić & T. Gelo (Eds.), Conference Proceedings of the International Conference on the Economics of Decoupling (pp. 289–308). Zagreb, Croatia: University of Zagreb. ISBN:978-953-347-337-6
Tóth-Bozó, B., & Szalai, L. (2019). Political Announcements and Exchange Rate Expectations. World Journal of Applied Economics, 5(2), 53–66. DOI:10.22440/wjae.5.2.2
Table of links
Empirical Investigation of the Appropriability Hypotheses (Budapest, 2013)
Social Consequences of the Resource Curse (Kaposvár, 2016)
Institutions and Resource-driven Development (Lisbon, 2018)
An Experimental Approach to the Resource Curse (Zagreb, 2019)
Experiment in Practice (video)
Universidad Anáhuac (Cancún)
Universidad de Francisco de Vitoria (Pozuelo)
Saint Louis University (Madrid Campus)
List of references
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Boschini, A. D., Pettersson, J., & Roine, J. (2007). Resource Curse or Not: A Question of Appropriability. Scandinavian Journal of Economics, 109(3), 593–617. DOI:10.1111/j.1467-9442.2007.00509.x
Corden, M. W., & Neary, P. J. (1982). Booming Sector and De-Industrialisation in a Small Open Economy. The Economic Journal, 92(368), 825–848.
Drelichman, M. (2005). All that glitters: Precious metals, rent seeking and the decline of Spain. European Review of Economic History, 9(3), 313–336. DOI:10.1017/S1361491605001528
James, Alexander. (2015). The resource curse: A statistical mirage? Journal of Development Economics, 114, 55–63. DOI:10.1016/j.jdeveco.2014.10.006
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Papyrakis, E. (2016). The Resource Curse - What Have We Learned from Two Decades of Intensive Research: Introduction to the Special Issue. Journal of Development Studies, (April), 1–11. DOI:10.1080/00220388.2016.1160070
Sachs, J. D., & Warner, A. M. (1995). Natural Resource Abundance and Economic Growth (NBER Working Paper No. 5398). Cambridge.
Sachs, J. D., & Warner, A. M. (1997). Fundamental Sources of Long-Run Growth. The American Economic Review, 87(2), 184–188.
Sala-i-Martin, X. (1997). I Just Ran Two Million Regressions. The American Economic Review, 87(2), 178–183.