Essays on Natural Resource Impact

Review of Development Economics, 2011

We look at the type of natural resource dependence and growth in developing countries. Certain natural resources called point-source, such as oil and minerals, exhibit concentrated and capturable revenue patterns, while revenue flows from resources such as agriculture are more diffused. Developing countries that export the former type of products are regarded prone to growth failure due to institutional failure. We present an explicit model of growth collapse with micro-foundations in rent-seeking contests with increasing returns. Our econometric analysis is among the few in this literature with a panel data dimension. Point-source-type natural resource dependence does retard institutional development in both governance and democracy, which hampers growth. The resource curse, however, is more general and not simply confined to mineral exporters.

Economic Modelling, 2019

In this paper we discuss the relationship between economic growth and natural resources at a global level, taking into account geography. With this aim, our model integrates elements of the theories of endogenous growth, natural resources and new economic geography. We find that an increase in the world growth rate can lead to a higher depletion of the natural resources following an increase in the world demand due to expansion in population. However, the consideration of geography and growth mechanisms make the relationship between growth and natural resources more complex, and can even lead to the opposite conclusion when the forces behind growth are different from world demand. Indeed, either a reduction in transport costs or an increase in R&D productivity appears to be able to generate a faster growth compatible with a lower depletion of natural resources.

This paper summarizes and extends previous research that has shown evidence of a `curse of natural resourcesa } countries with great natural resource wealth tend nevertheless to grow more slowly than resource-poor countries. This result is not easily explained by other variables, or by alternative ways to measure resource abundance. This paper shows that there is little direct evidence that omitted geographical or climate variables explain the curse, or that there is a bias resulting from some other unobserved growth deterrent. Resource-abundant countries tended to be high-price economies and, perhaps as a consequence, these countries tended to miss-out on export-led growth.

We study the role of natural-resource abundance on economic growth in a two-country Ramsey model. The countries differ only in that one is endowed with an exhaustible resource that is a necessary factor of production in both countries and in their initial stocks of capital. Conditions are shown where gains from trade lead to a natural resource curse without market distortions. The curse is shown to solely depend on technological and preference parameters. Within a resource curse setting, the larger (smaller) the capital stock of the economy poor in exhaustible resources to that of the economy rich in exhaustible resources, the larger (smaller) is the GDP growth underperformance of the country rich in exhaustible resources. These findings can help explain why the curse occurs in some countries and not others. We also show the existence of history-dependent steady-state equilibria.

Opec Energy Review, 2010

Having analysed the macroeconomic performance of large oil exporters, I found that, in many cases, rents from natural resources have been successfully used to enhance economic growth. Nevertheless, adherents of the ‘resource curse’ seem to have found ample evidence suggesting that resource-abundant countries grow slower than resource-poor countries. A review of empirical research on the ‘resource curse’ reveals that the variables used were usually proxies for resource dependence. These variables introduce a bias, making less developed economies per se more resource ‘abundant’ than developed economies. As a consequence, a new variable, not containing any information on a country's stage of development, was introduced. Comparing the variables on resource dependence and resource abundance in a model by Sachs and Warner, resource abundance was not significant. In a new model, resource abundance was even positively correlated with growth.

RePEc: Research Papers in Economics, 2001

Empirical evidence seems to indicate that economic growth since 1965 has varied inversely with natural resource abundance across countries. This paper proposes a linkage between abundant natural resources and economic growth, through saving and investment. When the share of output that accrues to the owners of natural resources rises, the demand for capital falls leading to lower real interest rates and less rapid growth. However, institutional reforms paving the way to a more efficient allocation of capital may enhance the quantity as well as the quality of new investment and sustain growth. Empirical evidence from 85 countries from 1965 to 1998 suggests that abundant natural capital may on average crowd out physical capital thereby inhibiting economic growth. The results also suggest that abundant natural resources may hurt saving and investment indirectly by slowing down the development of the financial system. However, high growth rates in a handful of formerly resource-dependent economies seem to indicate that economic and structural reforms can overcome any adverse effect of natural resources on economic growth. JEL: O11.

2015

The state variables of the original theoretical law of capital accumulation are relative labour compensation, employment ratio, gross unit resource rent, produced capital-output ratio, proved non-renewable reserves-output ratio, desired proved non-renewable reserves-output ratio, and depletion of proved non-renewable reserves per unit of net output. This theoretical law is a subject of multiple tests. Taking it as a starting point this paper establishes that the basic “neoclassical” ecologicaleconomic models in the Professor D. Romer textbook can be refined and generalized. Their premises on infinite growth of output-natural resources ratio and on reducing unit resources depletion almost to zero even along with declining net output are not practically feasible. The longterm environmental policies recommended by this textbook could be damaging or inefficient. The proposed deep alterations of the basic “neoclassical” models shed light on balanced and aggravated regimes of capital accu...

2008

Resources, Environment and Sustainability, 2021

This study aims to analyze the effects of natural resources, human capital, financial development, industrialization, technological progress, and international trade on the economic growth of the Next Eleven countries between 1990 and 2019. The novelty of this study lies in its approach to explore the indirect economic growth impacts of human capital development via the transmission channel of the natural resource utilization in these counties. The econometric methods involved are robust for accounting the cross-sectional dependence and slope heterogeneity concerns in the data. The results authenticate the resource curse hypothesis since higher natural resources rent are found to inhibit economic growth of the Next Eleven nations. In contrast, human capital development, financial development, industrialization, technological innovation and international trade participation are found to synthesize economic growth. Besides, another interesting finding in this study shows that human capital and natural resources jointly exert positive impacts on economic growth. Hence, it can be said that human capital development assists to mitigate the resource curse impacts in the case of the Next Eleven countries. Therefore, these findings necessitate the pertinence of boosting investments in human capital development, enhancing the strength of the financial sector, expediting industrialization, facilitating technological innovation, and amplifying international trade volumes for achieving higher economic growth in the Next Eleven countries. More importantly, human capital development should be prioritized for transforming the curse of the natural resources into blessing for these nations.

RePEc: Research Papers in Economics, 2011

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2000

We examine empirically the effect of natural resource abundance on economic growth. We find that natural resources have a negative impact on growth when considered in isolation, but a positive impact on growth when including in the analysis other variables such as corruption, investments, openness, terms of trade, and schooling, and treating these variables as independent. However, when we take account of the effect of natural resources on the other variables and furthermore consider the indirect effect on growth, that is, when we examine possible transmission channels, we find a strong negative effect of natural resources on growth. Finally, we calculate the relative importance of each transmission channel.

Bulletins, 2005

We investigate the Ramsey-like dynamics of nonrenewable resource abundance on economic growth and welfare in a two country world. One country is endowed with a nonrenewableresource Otherwise, countries are identical. The one country result of Rodríguez and Sachs (1999) that the initial stock of the resource influences negatively the GDP growth of the resource-rich country, is shown to not hold in general. The endowment of the nonrenewable resource can have an initial positive effect on the growth rate of the resource-rich country provided the elasticity of the initial price of the resource with regard to the initial stock of the resource is greater than minus one. The ratio of the consumption levels of the two countries are shown to be constant over time, and determined by the ratio of initial wealth. An analytical solution of the model allows us to indicate how accumulable and depletable assets affect per country welfare and income growth. For this case we demonstrate that a technological change-that is nonrenewable resource saving-can benefit the resource-rich country's relative welfare.

Business and Economics Research Journal, 2020

Ever since its growing importance, the natural resource abundance and economic growth relationship have been a hot field of study for researchers. In the existing literature, many studies pointing to the negative impact of natural resource endowment on economic growth performance. While some "blessed" natural resourceabundant countries enjoy their natural resource revenues and have a remarkable economic growth performance, many others are "cursed" despite having great natural resource wealth. Natural resource windfall may induce Dutch Disease with excessive rent-seeking, corruption, poor institutionalism, and democracy in resource-rich developing countries. The aim of this study is to investigate the causes of the natural resource curse in developing natural resource-rich countries. In this research, the sample natural resource-rich countries were analyzed between 1980 and 2018 to validate the existence of the natural resource curse in these countries. In the first part, the conceptual framework and reasons for the natural resource curse were explained in detail. In the second part, successful natural resource-rich country cases, as well as selected resource-rich developing countries, were compared according to their economic growth performances, their natural resource revenues, and degree of dependence of their economies on the natural resource revenues. In the last part, some policy suggestions were put forward to avoid a natural resource curse in developing countries.

TEAM Conference 2014 Proceedings, Kecskemet, Hungary

There is a well-known claim about the natural resource curse concerning the effect of dependence on the exploitation of natural resources to generate GDP of individual states, which exhibit a high degree of this kind of dependence. This paper examines the states with the highest share (20% or more in 2012) of total natural resources rents as % of GDP in the World and the reported figures are compared with data on economic growth as measured by GDP growth in the current U.S. $ and Gross National Income (GNI) per capita (PPP) of the same country in the period 1994-2012. From these data, the results are deduced by commenting on the impact of the high share of rents from the exploitation of natural resources in GDP on the growth of GDP and GNI per capita (PPP) of states with a high degree of natural resources rents in GDP in the period 1994-2012 and provide answers for why the level of disparity between the growth rates of GDP and GNI per capita in the period of research in one particular group of countries is higher, and in the other particular group lower.