Crowding-out Effect or Institutions? The Resource Curse Revisited with an Investigation of U.S. States

The phenomenon of low economic growth in resource-rich regions is recognized as the “resource curse”. This research empirically shows the existence of a resource curse at the U.S. state level. Of two widely offered explanations for the resource curse, our analysis supports the crowding-out effect in the U.S. rather than the institutional explanation. Investment and R&D are the two main crowded-out factors.