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International Trade, Exhaustible-Resource Abundance and Economic Growth

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  • Beatrix Gaitan

    (Free University of Berlin)

  • Terry Roe

    (University of Minnesota)

Abstract

Countries with oil and other natural resources have grown less rapidly than those countries without. This phenomenon is known as the "natural resource curse". We develop an infinite-horizon, two-country model of trade in which countries are identical, except that one country is endowed with deposits of an exhaustible resource and the other is not. Within the context of the model, we show that this phenomenon can be explained in part by an inelastic demand for the exhaustible resource that increases growth in trade revenues and induces the resource-abundant country to invest relatively less than the country lacking in exhaustible resources. These results are derived analytically and illustrated by an empirical analysis based on plausible parameters obtained from data. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 15 (2012)
Issue (Month): 1 (January)
Pages: 72-93

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Handle: RePEc:red:issued:06-100

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Keywords: Growth; Exhaustible resources; Depletable resources; International trade; History dependent equilibria;

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References

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Cited by:
  1. Spolador, Humberto Francisco Silva & Roe, Terry L., 2012. "The Role of Agriculture on the Recent Brazilian Economic Growth," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 125822, International Association of Agricultural Economists.

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