The economic performance of the transition economies rich in natural resources. The cases of Azerbaijan and Kazakhstan.

This paper reviews the hypothesis that natural resource abundance can impede long-term economic growth in the transition economies. The “natural resources curse” is quite a widespread phenomenon in developing and emerging market countries. A similar pattern can also be noted among the transition economies of the former Communist Bloc. There is strong evidence of a negative correlation between natural resource abundance and economic performance in many previous studies. This study will try to control the validity of previous results using the up-to-date data of the last 20 years on Azerbaijan and Kazakhstan's examples. The principal transmission channels through which adverse effects work are rent-seeking, policy failures, including neglect of adequate education, and exchange rate appreciation. The paper concludes with a discussion of possible policy choices that could lead to a more sustainable development path.