Advanced Search
MyIDEAS: Login

Growth, development and natural resources: New evidence using a heterogeneous panel analysis

Contents:

Author Info

  • Cavalcanti, Tiago V. de V.
  • Mohaddes, Kamiar
  • Raissi, Mehdi

Abstract

This paper explores whether natural resource abundance is a curse or a blessing. To do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) impacts of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we explicitly recognize that there is a substantial cross-sectional dependence and cross-country heterogeneity in our sample, which covers 53 oil exporting and importing countries with very different historical and institutional backgrounds, and adopt the non-stationary panel methodologies developed by Pesaran (2006) and Pedroni (2000) for estimation. Our results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both income levels and economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S1062976911000305
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 51 (2011)
Issue (Month): 4 ()
Pages: 305-318

as in new window
Handle: RePEc:eee:quaeco:v:51:y:2011:i:4:p:305-318

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620167

Related research

Keywords: Growth models; Natural resource curse; Cointegration; Cross sectional dependence; Common correlated effects; Oil;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  2. Holly, Sean & Pesaran, M. Hashem & Yamagata, Takashi, 2010. "A spatio-temporal model of house prices in the USA," Journal of Econometrics, Elsevier, vol. 158(1), pages 160-173, September.
  3. Michael Alexeev & Robert Conrad, 2009. "The Elusive Curse of Oil," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 586-598, August.
  4. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
  5. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1999. "A Mixed Blessing," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 204-225, June.
  6. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  7. Rick van der Ploeg & Tony Venables, 2009. "Symposium on resource rich economies Introduction," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 625-627, October.
  8. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  9. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  10. M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
  11. G. Kapetanios & M. Hashem Pesaran & T. Yamagata, 2010. "Panels with nonstationary multifactor error structures," Post-Print peer-00768190, HAL.
  12. Jean-Philippe Stijns, 2001. "Natural Resource Abundance And Economic Growth Revisited," Development and Comp Systems 0103001, EconWPA.
  13. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  14. Anne D. Boschini & Jan Pettersson & Jesper Roine, 2007. "Resource Curse or Not: A Question of Appropriability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 593-617, 09.
  15. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
  16. Gylfason, Thorvaldur, 2000. "Natural Resources, Education, and Economic Development," CEPR Discussion Papers 2594, C.E.P.R. Discussion Papers.
  17. Hadi Salehi Esfahani & Kamiar Mohaddes & M. Hashem Pesaran, 2009. "Oil Exports and the Iranian Economy," CESifo Working Paper Series 2843, CESifo Group Munich.
  18. Henry, Peter B., 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," Research Papers 1951, Stanford University, Graduate School of Business.
  19. Christa N. Brunnschweiler & Erwin H. Bulte, 2006. "The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings," CER-ETH Economics working paper series 06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  20. International Monetary Fund, 2012. "Commodity Price Volatility and the Sources of Growth," IMF Working Papers 12/12, International Monetary Fund.
  21. Francesco Caselli & Tom Cunningham, 2009. "Leader Behavior and the Natural Resource Curse," CEP Discussion Papers dp0913, Centre for Economic Performance, LSE.
  22. M. Hashem Pesaran & Elisa Tosetti, 2011. "Large panels with common factors and spatial correlation," Post-Print peer-00796743, HAL.
  23. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  24. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  25. Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Institutions and the resource curse," Memorandum 29/2002, Oslo University, Department of Economics.
  26. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  27. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
  28. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Department of Economics Working Papers 2000-02, Department of Economics, Williams College.
  29. Peter Pedroni, 2004. "Social Capital, Barriers to Production, and Capital Shares: Implications for the Importance of Parameter Heterogeneity from a Nonstationary Panel Approach," Department of Economics Working Papers 2004-03, Department of Economics, Williams College.
  30. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  31. Bulte, Erwin H. & Damania, Richard & Deacon, Robert T., 2005. "Resource intensity, institutions, and development," World Development, Elsevier, vol. 33(7), pages 1029-1044, July.
  32. M. Hashem Pesaran, 2004. "General Diagnostic Tests for Cross Section Dependence in Panels," CESifo Working Paper Series 1229, CESifo Group Munich.
  33. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  34. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
  35. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
  36. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  37. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mohaddes, K. & Pesaran, M.H., 2013. "One Hundred Years of Oil Income and the Iranian Economy: A curse or a Blessing," Cambridge Working Papers in Economics 1302, Faculty of Economics, University of Cambridge.
  2. Neustroev, Dmitry, 2013. "The Uzawa-Lucas Growth Model with Natural Resources," MPRA Paper 52937, University Library of Munich, Germany.
  3. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2012. "An Empirical Growth Model for Major Oil Exporters," IZA Discussion Papers 6468, Institute for the Study of Labor (IZA).
  4. Daniel Sakyi & Jose Villaverde & Adolfo Maza & Krishna Reddy Chittedieonardo, 2012. "Trade Openness, Growth and Development: Evidence from Heterogeneous Panel Cointegration Analysis for Middle-Income Countries," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID.
  5. Paul Cashin & Kamiar Mohaddes & Mehdi Raissi, 2012. "The Global Impact of the Systemic Economies and MENA Business Cycles," IMF Working Papers 12/255, International Monetary Fund.
  6. Cashin, P. & Mohaddes, K. & Raissi, M. & Raissi, M., 2012. "The Differential Effects of Oil Demand and Supply Shocks on the Global Economy," Cambridge Working Papers in Economics 1249, Faculty of Economics, University of Cambridge.
  7. Markus Eberhardt & Francis Teal, 2009. "Econometrics for Grumblers: A New Look at the Literature on Cross-Country Growth Empirics," CSAE Working Paper Series 2009-07, Centre for the Study of African Economies, University of Oxford.
  8. Hostland, Douglas & Giugale, Marcelo M., 2013. "Africa's macroeconomic story," Policy Research Working Paper Series 6635, The World Bank.
  9. Leong, W. & Mohaddes, K., 2011. "Institutions and the Volatility Curse," Cambridge Working Papers in Economics 1145, Faculty of Economics, University of Cambridge.
  10. Eberhardt, Markus & Helmers, Christian & Strauss, Hubert, 2010. "Do spillovers matter when estimating private returns to R&D?," Economic and Financial Reports 2010/1, European Investment Bank, Economics Department.
  11. International Monetary Fund, 2011. "Oil-Price Boom and Real Exchange Rate Appreciation: Is There Dutch Disease in the CEMAC?," IMF Working Papers 11/268, International Monetary Fund.
  12. Cavalcanti, T.V.de V. & Mohaddes, K. & Raissi, M., 2011. "Commodity Price Volatility and the Sources of Growth," Cambridge Working Papers in Economics 1112, Faculty of Economics, University of Cambridge.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:51:y:2011:i:4:p:305-318. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.