Natural Resources and Development: Comparison of Bangladesh and South Korea

In recent decades, the resource‐poor countries have strongly outperformed the resource‐abundant countries in terms of economic development. However, some resource‐poor countries like South Korea have been more dynamic than other countries like Bangladesh. Two models of resource‐driven growth, the staple trap model and the competitive industrialisation model, help to explain why Bangladesh lagged. Prior to the 1980s Bangladesh drifted into the staple trap model associated with the resource‐abundant countries so that incentives were squeezed in the primary sector to support slow‐maturing manufacturing. However, the staple trap retards passage through the demographic transition, so rapid population growth eventually pushed Bangladesh towards severe land‐scarcity that triggered hesitant reform towards competitive industrialisation in the 1980s. The economy then outpaced many resource‐abundant countries but still grew at barely two‐thirds of its potential.