Amrita Dhillon, Pramila Krishnan, Manasa Patnam, Carlo Perroni, 11 November 2016

The ‘curse’ of natural resources on economic development has been well documented, but there is no consensus on its underlying causes. Exploiting the formation of new Indian states in 2001, this column shows that the effects of state breakup on local economies differ systematically across natural resource-rich and resource-poor areas, in line with the spatial distribution of natural resources within states. The relationship between resource abundance and economic outcomes flows, at least in part, through a political channel.

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