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Resource abundance, growth and welfare: A Schumpeterian perspective

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  • Peretto, Pietro F.

Abstract

This paper takes a new look at the long-run implications of resource abundance. It develops a Schumpeterian model of endogenous growth that incorporates an upstream resource-intensive sector and yields an analytical solution for the transition path. It then derives conditions under which, as the economy's endowment of a natural resource rises, (i) growth accelerates and welfare rises, (ii) growth decelerates but welfare rises nevertheless, and (iii) growth decelerates and welfare falls. Which of these scenarios prevails depends on the response of the natural resource price to an increase in the resource endowment. The price response determines the change in income earned by the owners of the resource (the households) and thereby the change in their expenditure on manufacturing goods. Since manufacturing is the economy's innovative sector, this income-to-expenditure effect links resource abundance to the size of the market for manufacturing goods and drives how re-source abundance affects incentives to undertake innovative activity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 97 (2012)
Issue (Month): 1 ()
Pages: 142-155

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Handle: RePEc:eee:deveco:v:97:y:2012:i:1:p:142-155

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Endogenous growth; Endogenous technological change; Natural resources;

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References

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  1. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
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  8. Peretto, Pietro F., 1996. "Technological Change and Population Growth," Working Papers 96-28, Duke University, Department of Economics.
  9. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November.
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Cited by:
  1. Simone Valente & Nujin Suphaphiphat & Pietro F. Peretto, 2013. "Endogenous Growth and Property Rights Over Renewable Resources," Working Paper Series 14413, Department of Economics, Norwegian University of Science and Technology.
  2. Puzon, Klarizze, 2013. "Cost-reducing R&D in the presence of an appropriation alternative: an application to the natural resource curse," EconStor Preprints 71189, ZBW - German National Library of Economics.
  3. Angelo Antoci & Paolo Russu & Serena Sordi & Elisa Ticci, 2012. "The interaction between natural resources- and physical capital-intensive sectors in a behavioral model of economic growth," Department of Economics University of Siena 661, Department of Economics, University of Siena.
  4. Thanh Le & Cuong Le Van, 2014. "Natural Resources, R&D and Economic Growth," Working Papers 2014-112, Department of Research, Ipag Business School.
  5. Quamrul Ashraf & Stelios Michalopoulos, 2013. "Climatic Fluctuations and the Diffusion of Agriculture," NBER Working Papers 18765, National Bureau of Economic Research, Inc.

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