James Cust

Research

Working papers, publications, books, and policy outputs on natural resources, the presource curse, critical minerals, and industrial policy in developing countries.

Papers

Working papers and publications listed together. Filter by status to separate them.

Status

Topic

Published ResourcesEnvironment 2023

Public Governance versus Corporate Governance: Evidence from Oil Drilling in Forests

James Cust, Torfinn Harding, Hanna Krings, Alexis Rivera-Ballesteros

satellite dataspatial analysis

Petroleum companies look for oil and gas in some of the most remote and biodiverse forested areas on the planet. To study how local environmental footprints vary across countries and companies, we combine global company-level geo-coded data on oil drilling with high resolution data on forest loss. We find that oil wells drilled in countries with better public governance, measured by democracy scores, are associated with substantially lower forest loss in the period after drilling. In contrast, we do not find evidence of less forest clearance among companies with presumptively 'better' corporate governance practices, such as major international companies, publicly listed companies, or members of an industry association committed to high environmental standards. These results do not support a "pollution halo" effect, whereby companies might bring better environmental practices with them, exceeding domestic environmental standards.

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Working Paper GrowthConvergence 2023

Are the Poorest Catching Up?

James Cust, Paul Collier, Alexis Rivera-Ballesteros

cross countrypanel data

Are global incomes converging or diverging? Despite recent empirical evidence supporting the hypothesis of unconditional beta convergence, this paper argues that such findings overlook the stark reality facing the world's poorest people. Many lower income countries, including those among the so-called "Bottom Billion," continue to slip further behind the rest of the world, while the numbers of those living in extreme poverty are beginning to rise again after decades of decline. The paper explores how these contradictions can coexist and discusses the policy importance of looking beyond global average trends. The paper identifies three confusions that can arise when analyzing trends in income convergence. First, a focus on unconditional convergence can overlook important policy questions, such as whether countries are likely to eradicate extreme poverty or to catch up with the rest of the world. Tests for convergence may yield only partial answers, especially in light of recent findings that show that unconditional beta convergence can coexist with a significant group of countries slipping ever further behind the rest of the world. Meanwhile extreme poverty numbers are increasing rather than decreasing. Second, average trends can both obscure and be distorted by underlying differences in country composition. In the extreme case, while fast-growing China was below global mean incomes between 2000 and 2020, it significantly boosted empirical support for global convergence. Now that China has passed this threshold, the finding will likely reverse in the coming years as more data is available. Third, different levels of availability of time periods and country coverage can distort and even bias empirical findings, especially where limitations to data availability is correlated with lower income or diverging economies.

View paper WB PRWP ↗

Working Paper ResourcesGrowth 2022

The Dog that Didn't Bark: The Missed Opportunity of Africa's Resource Boom

James Cust, Alexis Rivera Ballesteros, Albert G. Zeufack

cross countrypanel data

The commodity price boom from 2004–2014 was a huge economic opportunity for African countries abundant in oil, gas and minerals. During this period their government revenues from resources grew by an average of 1.1 billion US$ per year, and economic growth in those same resource-rich countries surged. GDP growth in resource-rich countries accelerated from 4.6% to 5.4% as countries entered a decade long period of sustained high commodity prices. Nonetheless, the paper traces a significant missed opportunity for resource-rich countries in Africa, with little to show for it in the post-boom period, which saw growth collapse far below pre-boom levels, to 2.7% per annum. This paper considers the record of performance during the boom (2004–2014) and subsequent bust from 2015 onwards. The paper describes four main outcomes of the boom: 1) measures of resource dependency rose in Sub-Saharan Africa during the boom, 2) the growth record was strong during the boom but collapsed once commodity prices fell, 3) poverty and inequality rose during the boom despite strong GDP growth, 4) resource-rich countries failed to diversify both their exports and their asset base, leaving them poorly prepared for the end of the boom and a period of lower commodity prices and subsequent COVID-19 pandemic. The conclusions are stark. During this golden decade of sustained high commodity prices and booming revenues, there was limited re-investment of those revenues into building sustainable assets for the future. In other words, countries consumed the boom, rather than successfully transformed their economies. The conclusion is that many resource-rich countries in the region squandered their 'once in a generation' opportunity for economic transformation, offering policy lessons that may prove valuable as we enter a new period of elevated commodity prices.

View paper WB PRWP ↗

Published ResourcesDutch Disease 2022

Dutch Disease and the Public Sector: How Natural Resources Can Undermine Competitiveness in Africa

James Cust, Shantayanan Devarajan, Pierre Mandon

panel datacross country

Slow growth in manufactured and agricultural exports has been attributed to the high share of natural resources in many African economies. Not only does the resource sector draw labour and capital away from other sectors, but also the spending of resource revenues in the domestic economy bids up the price of non-tradable goods, making the tradable sectors less competitive—a phenomenon known as Dutch disease. This paper argues that an important and neglected channel for this effect is through the public sector. Since government receives a large portion of resource revenues, the public-sector booms alongside the resource sector. But the government is largely unaccountable for the spending of these revenues, since they are not raised via taxes on citizens. The result is this money might be spent in inefficient and distortionary ways, undermining competitiveness. One solution may be for government to transfer natural-resource revenues directly to citizens and then tax them to finance public expenditure. The increased accountability might improve the effectiveness of the public sector and therefore the competitiveness of the private sector.

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Working Paper ResourcesFiscal Policy 2022

Resource-Backed Loans in Sub-Saharan Africa

David Mihalyi, Jyhjong Hwang, Diego Rivetti, James Cust

case studycross country

This paper investigates the characteristics of resource-backed lending across Sub-Saharan Africa. To shed light on this type of lending, the paper presents new information on 30 resource-backed loans between 2004 and 2018, identified through publicly available information. These loans were concentrated in a few countries, where they represented a sizable fraction of all borrowing and were typically taken by central governments and state-owned enterprises. Although the loan terms are mostly opaque, where data are available, the study finds that such loans are not cheaper than regular loans. The paper highlights opportunities to transparency and offers some suggestions for improving the governance of collateralized borrowings across developing countries.

View paper WB PRWP ↗

Working Paper ResourcesPresource Curse 2020

Natural Resource Discoveries, Citizen Expectations and Household Decisions

James Cust, Justice Tei Mensah

diff in diffsurvey data

Major oil and gas discoveries are often associated with excitement and jubilation among citizens and government officials. But the extent to which discoveries substantially alter citizen expectations about economic conditions in a country remains an open question. The paper combines Afrobarometer data on household expectations on economic conditions and living standards with the announcement of oil and gas discoveries in Africa to estimate the effect of discoveries on expectations. The identification strategy exploits plausibly exogenous variation in the timing of discoveries relative to the rollout of survey interviews. The study find that discoveries increase expectations of better economic conditions and living standards by 35 and 52 percent respectively. Further, the paper finds that the overall expectations boom effect pertains only to countries with weaker institutions. The paper also provides evidence that households incorporate these expectations into their migration and fertility decisions, with fewer applications in the short run to the U.S. green card lottery and increased childbirth following discovery announcements.

View paper WB PRWP ↗

Published ResourcesInstitutions 2020

Institutions and the Location of Oil Exploration

James Cust, Torfinn Harding

spatial analysisborder discontinuity

We provide evidence that institutions have a strong influence over where oil and gas exploration takes place. We utilise a global data set on the location of exploration wells and national borders. This allows for a regression discontinuity design with the identifying assumption that the position of borders was determined independently of geology. In order to break potential simultaneity between borders, institutions, and activities in the oil sector, we focus on drilling that occurred after the formation of borders and institutions. Our sample covers 88 countries over the 1966–2010 period. At borders, we estimate more than twice as much drilling on the side with better institutional quality. Subsample analyses reveal effects of institutions on exploration drilling in both developing and high income countries, as well as across three types of operating companies. We find that the supermajor international oil companies are particularly sensitive to institutional quality in developing countries. Our findings are consistent with the view that institutions shape both exploration companies' incentives to invest in drilling and host countries' supply of drilling opportunities.

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Published ResourcesDutch Disease 2019

Dutch Disease Resistance: Evidence from Indonesian Firms

James Cust, Torfinn Harding, Pierre-Louis Vézina

firm level datapanel data

Oil and gas windfalls may lead to the Dutch disease, that is, the crowding out of the manufacturing sector due to rising wages when labor is drawn to the expanding sectors. In this paper, we exploit the fact that oil and gas discoveries contain an element of luck as well as oil price fluctuations to capture exogenous variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls on average cause wages as well as firms' labor productivity, output, and employment to increase, while product unit values and exit rates are unaffected. Heterogeneity analysis reveals that the least productive firms are more likely to exit, and surviving low-productivity firms see relatively large expansions in output and labor productivity, while high-productivity firms see relatively high expansions in employment.

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Working Paper ResourcesPresource Curse 2017

Evidence for a Presource Curse? Oil Discoveries, Elevated Expectations, and Growth Disappointments

James Cust, David Mihalyi

diff in diffevent study

Oil discoveries can constitute a major positive and exogenous shock to economic activity, but the resource curse hypothesis would suggest they might also be detrimental to growth over the long run. This paper utilizes a new methodology for estimating growth underperformance to examine the extent to which discoveries depress the growth path of a country following a discovery and prior to production starting. The study finds causal evidence of a significant negative effect on short-run growth and growth relative to counterfactual forecast growth in countries with weak institutions, creating growth disappointments prior to private and public resource windfalls. This effect is termed the presource curse. For a giant oil or gas discovery in 1988-2010, the study estimates an average growth disappointment effect of 0.83 percentage points, measured as the average annual gap between forecast and actual growth over the five years following a discovery. Further, the estimated effect varies by the size of the discovery, increasing to a 1.77 percentage points gap in the case of super giant discoveries. The estimated effect is inversely related to the quality of political institutions, and driven by countries with lower institutional quality at the time of the discovery, consistent with the similar long-run results documented in the resource curse literature. For countries with below-threshold institutional quality, the growth disappointment effect is larger, measured as 1.35 percentage points in annual terms. There is no measured growth disappointment effect for countries with strong institutions. Using the synthetic control method, we confirm our findings for a selection of countries above and below the institutional quality threshold. The findings suggest that studies of the resource curse that focus only on the effects of resource exploitation or examine only long-run growth effects may overlook important short-run growth disappointments following discoveries, and the way countries respond to news shocks.

View paper WB PRWP ↗

Coverage The Economist ↗ IMF F&D ↗ IMF Podcast ↗ IMF Blog ↗

Working Paper ResourcesClimate 2017

Stranded Nations? The Climate Policy Implications for Fossil Fuel-Rich Developing Countries

David Manley, James Cust, Giorgia Cecchinato

scenario analysis

Climate policies aimed at limiting global warming to 2°C imply that a significant share of the world's fossil fuel reserves must remain unburned. We examine the implications for fossil fuel-rich developing countries — potential 'stranded nations' — whose subsoil assets may become commercially unviable. We estimate the scale of stranded asset risk by country and discuss policy options for managing the transition.

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Published ResourcesInfrastructure 2015

Investing in Africa's Infrastructure: Financing and Policy Options

Paul Collier, James Cust

policy analysis

Africa has a severe shortage of infrastructure. Addressing this shortage involves both correcting the problems of poor maintenance and underinvestment that have caused it and raising the finance for a phase of remedial investment. We review evidence that substantiates the shortage, in terms of both stocks and the potential for high rates of return. We then turn to the range of options for attracting remedial finance, focusing in particular on how they relate to the region's endowment of natural resources. Governments will need to build the regulatory and technical capacities to tap into this opportunity for leveraged private capital flows by reducing the risks associated with large, capital-intensive projects. Furthermore, governments must build the authority necessary to manage both the challenges associated with deferred public consumption and the time consistency needed to support long-term ventures.

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Published ResourcesLocal Development 2015

The Local Economic Impacts of Natural Resource Extraction

James Cust, Steven Poelhekke

literature review

Whether it is fair to characterize natural resource wealth as a curse is still debated. Most of the evidence derives from cross-country analyses, providing cases both for and against a potential resource curse. Scholars are increasingly turning to within-country evidence to deepen our understanding of the potential drivers, and outcomes, of resource wealth effects. Moving away from cross-country studies offers new perspectives on the resource curse debate and can help overcome concerns regarding endogeneity. Therefore, scholars are leveraging datasets that provide greater disaggregation of economic responses and exogenous identification of impacts. This article surveys the literature on these studies of local and regional effects of natural resource extraction. We discuss data availability and quality, recent advances in methodological tools, and the main findings of several research areas. These areas include the direct impact of natural resource production on local labor markets and welfare, the effects of government spending channels resulting from mining revenue, and regional spillovers. Finally, we take stock of the state of the literature and provide suggestions for future research.

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Published ClimatePolicy 2009

Using Intermediate Indicators: Lessons for Climate Policy

James Cust

policy analysis

What roles can metrics, particularly intermediate indicators, play in informing the design and implementation of policies and actions with climate co-benefits? While the precise definition of indicators differs across sectors and strands of the literature, performance metrics typically measure not only the final outcomes, but also inputs, processes, and output measurements of actions. Indicators frameworks have become a widespread feature of policy and project monitoring across both affluent and lower-income economies for reporting, learning and, in some cases, target- or incentive-based management. Indicators play an important and positive role in project management and policy making, even where they are not tied to explicit targets or incentive mechanisms. In particular, the use of intermediate indicators can provide early and timely reporting of progress and setbacks, allowing for policy learning and discussion of best practice across projects or programmes. Policy relevance: A successful transition to low-carbon growth trajectories depends on the ability of governments to implement actions and policies to initiate and guide low-carbon development. The experience from public and private actors in other sectors shows that suitable indicators are necessary to provide the information to manage policy implementation. In contrast, the UNFCCC framework only requires reporting on CO2 emissions (final outcomes). This raises the question of whether additional indicators are required to support policy design, implementation of domestic action and best-practice learning. It further raises questions concerning the extent to which such reporting can be generic or should be associated with specific actions, and which reporting can be harmonized internationally or needs to be country-specific.

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Published EnergyClimate 2008

Space and Time: Wind in an Investment Planning Model

Karsten Neuhoff, Andreas Ehrenmann, Lucy Butler, James Cust, Harriet Hoexter, Kim Keats, Adam Kreczko, Graham Sinden

simulation model

Investment planning models inform investment decisions and government policies. Current models do not capture the intermittent nature of renewable energy sources, restricting the applicability of the models for high penetrations of renewables. We provide a methodology to capture spatial variation in wind output in combination with transmission constraints. The representation of wind distributions using stochastic approaches or using extensive historic data sets exceeds computational constraints for real world application. Hence we restrict the amount of input data, and use bootstrapping to illustrate the robustness of the results. For the UK power system we model wind deployment and the value of transmission capacity.

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Books & Chapters

Books, edited volumes, and book chapters.

Book Critical MineralsResources 2025

Mineral Resources of Africa

James Cust, World Bank Group

World Bank Group

Examines Africa's mineral wealth and its significance in the global clean energy transition, assessing the continent's rich endowment of twenty-six key minerals, the role of AI in exploration, the need for stronger geoscientific data systems, and opportunities for attracting responsible investment through balanced regulatory frameworks.

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Edited Volume ResourcesIndustrial Policy 2023

Africa's Resource Future: Harnessing Natural Resources for Economic Transformation during the Low-Carbon Transition

James Cust, Albert Zeufack

World Bank Group

This edited volume brings together leading researchers and practitioners to examine how African countries can harness their natural resource wealth for sustainable economic transformation. Spanning fiscal policy, governance, local content, environmental management, and the energy transition, the book provides evidence-based guidance for policymakers navigating the dual challenge of resource management and low-carbon development.

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Edited Volume ResourcesWealth Accounting 2021

The Changing Wealth of Nations 2021: Managing Assets for the Future

Glenn-Marie Lange, James Cust, Diego Herrera, Esther Naikal, Grzegorz Peszko

World Bank Group

The flagship World Bank report on comprehensive wealth accounting across countries. This edition introduces updated measures of natural capital, produced capital, human capital, and net foreign assets for 146 countries. It reveals that many nations — particularly in Sub-Saharan Africa — are depleting natural capital faster than they are accumulating other forms of wealth, raising fundamental questions about the sustainability of current growth paths.

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Policy Work

Policy briefs, reports, and background notes.

Policy Brief World Bank Blogs Resources 2025

Africa's Natural Resources: Engine for Economic Transformation

Blog post examining how Africa's untapped natural resource potential could drive economic transformation, drawing on evidence from the World Bank's Africa's Resource Future report. Discusses the policy conditions under which resource wealth can support rather than undermine diversification and long-run growth.

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Policy Brief World Bank Blogs CEoG 2022

Advice in the Time of COVID-19

Blog post on how African chief economic advisors used the Chief Economists of Government (CEoG) network to share responses to the pandemic. Launched in 2019 by the World Bank's Africa Office of the Chief Economist, CEoG convenes advisors from more than 40 Sub-Saharan African countries to exchange approaches on crisis response and economic recovery, and to strengthen knowledge-based policymaking.

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Policy Brief World Bank Blogs Natural Capital 2022

Managing Nature's Assets is Key to Sustainable Growth in Africa: Insights from the Changing Wealth of Nations 2021

Blog post drawing on the Changing Wealth of Nations 2021 report. Sub-Saharan Africa holds close to 20 percent of its total wealth in natural assets, and the 2004-2014 commodity boom left many resource-rich economies with declining wealth per capita once prices fell. Argues that Africa's future prosperity depends on converting finite natural resource revenues into human and physical capital rather than consumption.

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Policy Brief IMF Finance & Development Resources 2017

The Presource Curse

An accessible explanation of the presource curse — how countries can suffer economic damage from oil and gas discoveries years before any revenues arrive. Published in the IMF's flagship policy magazine, the article draws on cross-country evidence to show how elevated expectations, premature borrowing, and real exchange rate appreciation can undermine growth prospects.

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Report Natural Resource Governance Institute Resources 2014

Natural Resource Charter (Second Edition)

A comprehensive framework for good governance of natural resource wealth, structured around twelve precepts covering the full decision chain from the decision to extract through to the sustainable use of revenues. Developed as a practical tool for policymakers, parliamentarians, and civil society in resource-rich countries.

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