Despite the vast riches that oil brings to a nation, many oil-producing countries struggle with economic volatility and are unable to promote diversification—what is often referred to as the “resource curse” phenomenon. This book provides a new way of thinking about the developmental challenges associated with oil by centering on how policy makers in these countries have approached the business environment for private firms and entrepreneurs. Drawing upon statistical and historical data, the book demonstrates that abundant oil wealth is associated with a more restrictive business environment f ... More

Despite the vast riches that oil brings to a nation, many oil-producing countries struggle with economic volatility and are unable to promote diversification—what is often referred to as the “resource curse” phenomenon. This book provides a new way of thinking about the developmental challenges associated with oil by centering on how policy makers in these countries have approached the business environment for private firms and entrepreneurs. Drawing upon statistical and historical data, the book demonstrates that abundant oil wealth is associated with a more restrictive business environment for the private sector, particularly entrepreneurs and owners of small- and medium-sized enterprises (SMEs). An in-depth analysis of Iran traces how the oil windfall in the 1950s resulted in excessive regulation of nonelite entrepreneurs and firm owners, which continued well after the 1979 revolution. The book extends the analysis to show that other valuable natural resources, such as coal, lead to similar outcomes. A study of India reveals the negative impact of coal production on the business environment in states within this rapidly developing, democratic nation. However, a few oil-producing countries show signs of escaping this trap. A discussion of Saudi Arabia shows how policy reforms since the 1990s were made possible due to unique aspects of the country’s political economy. Looking forward, the book discusses the social, political, and economic benefits of business environment reforms for oil-producing countries that are seeking new ways to pursue sustainable development.