Although natural resource abundance usually allows a country to earn rents with less effort than building up a manufacturing industry requires, which takes a long time and sufficient technology to develop, many scholars have discovered that there is a negative relationship between natural resource abundance and economic growth. However, many of their papers focus solely on the impact of so-called ;;resource curse’ on economic growth. This thesis, on the other hand, focuses on the impact of the natural resource abundance on manufacturing sector instead of growth. Also, it attempts to empirically investigate how the ;;resource curse’ may lead to deindustrialization and whether the government plays a role on this matter.Thus, the main objectives of this paper are, firstly, to examine various external and internal factors that influence the process deindustrialization, and secondly, to explore how the government could utilize the rents earned from the commodity sector and improve the manufacturing sector, if the abundance of natural resources indeed impedes the manufacturing sector and economic growth. The panel data regression results indicate that resource curse-related variables do lead to, not only slow growth, but also deindustrialization. However, if the quality of institution or government improves, it is possible to lessen the negative impact of resource curse and may even be able to turn the negative impact to positive impact, if the quality is above certain level.In contrast to previous studies that main used cross-section data, the analysis in this paper uses a panel data that allows panel data regression, which would give a more concrete result. This paper suggests that the natural resource abundance does not always end up being a curse to manufacturing industry. Instead, with the effort of government, it could be a blessing.
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Impact of the Resource Curse on the Process of Deindustrialization and the Role of Government
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