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The Role of Natural Resources in Economic Development

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  • Edward Barbier

    (Dept of Economics and Finance, University of Wyoming, USA)

Abstract

In recent years economists have recognized that, along with physical and human capital, environmental resources should be viewed as important economic assets, which can be called natural capital. However, the services provided by natural capital are unique. They include the use of resources for material and energy inputs, the "assimilative capacity" to absorb waste, and the provision of ecological services. The latter services are particularly not well understood, and lie at the heart of the debate over the role of natural capital in sustainable development. That is, does the environment have a unique or "essential" role in sustaining human welfare, and if so, are special "compensation rules" required to ensure that future generations are not made worse off by natural capital depletion today? A further debate has emerged over whether environmental degradation in an economy may initially increase, but eventually declines, as per capita income increases. This hypothesis, called the environmental Kuznets curve (EKC) has led to a number of attempts to estimate empirically an "inverted U" shaped relationship between a variety of indicators of environmental pollution or resource depletion and the level of per capita income. Finally, recent economic theories and empirical evidence have questioned whether poorer economies that are endowed with abundant natural resources develop more rapidly than economies that are relatively resource poor. It is possible that resource abundant economies are not reinvesting the rents generated from natural resource exploitation into productive assets, or that resource booms actually divert economic resources from more productive and innovative sectors. The result is a "boom and bust" pattern of economic development. There is evidence of this phenomenon particularly with regard to economic development and land expansion, especially in Latin America. Overall, although our understanding of the role of natural resources in economic development has improved markedly in recent decades, there is still much to learn. How natural resource depletion is affecting the ecological services provided by the environment is one concern. In the case of the poor economies, there is increasing evidence that their prospects for economic "take off" are being adversely affected by the lack of efficient and sustainable management of their natural resource base. Yet the "underpricing" and "undervaluing" of natural capital makes it difficult to design appropriate policies for ensuring that natural resource rents are reinvested in other productive assets of the economy.

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File URL: http://www.adelaide.edu.au/cies/papers/0227.pdf
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Bibliographic Info

Paper provided by University of Adelaide, Centre for International Economic Studies in its series Centre for International Economic Studies Working Papers with number 2002-27.

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Length: 45 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:adl:cieswp:2002-27

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Postal: Adelaide SA 5005
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Web page: http://www.adelaide.edu.au/cies/
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Keywords: Economic development; Environmental Kuznets curve; Natural capital; Natural resources; Resource-abundant economies; Sustainable development;

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References

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  1. Beckerman, Wilfred, 1992. "Economic growth and the environment: Whose growth? whose environment?," World Development, Elsevier, vol. 20(4), pages 481-496, April.
  2. Stern, David I. & Common, Michael S. & Barbier, Edward B., 1996. "Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development," World Development, Elsevier, vol. 24(7), pages 1151-1160, July.
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  6. James Andreoni & Arik Levinson, 1998. "The Simple Analytics of the Environmental Kuznets Curve," NBER Working Papers 6739, National Bureau of Economic Research, Inc.
  7. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-54, May.
  8. Cole, M.A. & Rayner, A.J. & Bates, J.M., 1997. "The environmental Kuznets curve: an empirical analysis," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 401-416, November.
  9. Vincent, Jeffrey R., 1997. "Testing for environmental Kuznets curves within a developing country," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 417-431, November.
  10. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
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  14. Koop, Gary & Tole, Lise, 1999. "Is there an environmental Kuznets curve for deforestation?," Journal of Development Economics, Elsevier, vol. 58(1), pages 231-244, February.
  15. Edward B. Barbier, 1994. "Valuing Environmental Functions: Tropical Wetlands," Land Economics, University of Wisconsin Press, vol. 70(2), pages 155-173.
  16. Findlay, Ronald, 1996. "Modeling Global Interdependence: Centers, Peripheries, and Frontiers," American Economic Review, American Economic Association, vol. 86(2), pages 47-51, May.
  17. Komen, Marinus H.C. & Gerking, Shelby & Folmer, Henk, 1997. "Income and environmental R D: empirical evidence from OECD countries," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 505-515, November.
  18. Lopez, Ramon & Mitra, Siddhartha, 2000. "Corruption, Pollution, and the Kuznets Environment Curve," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 137-150, September.
  19. Panayotou, Theodore, 1997. "Demystifying the environmental Kuznets curve: turning a black box into a policy tool," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 465-484, November.
  20. Barbier, Edward B., 1997. "Introduction to the environmental Kuznets curve special issue," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 369-381, November.
  21. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
  22. Lieb, Christoph M., 2002. "The environmental Kuznets curve and satiation: a simple static model," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 429-448, July.
  23. CARSON, RICHARd T. & JEON, YONGIL & McCUBBIN, DONALD R., 1997. "The relationship between air pollution emissions and income: US Data," Environment and Development Economics, Cambridge University Press, vol. 2(04), pages 433-450, November.
  24. Edward B. Barbier, 2002. "Institutional Constraints and Deforestation: An Application to Mexico," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 508-519, July.
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Citations

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Cited by:
  1. Ulla Lehmijoki, 2004. "On the Beach? Sustainability, Optimal Pollution, and Optimal Population," DEGIT Conference Papers c009_039, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Costantini, Valeria & Monni, Salvatore, 2008. "Environment, human development and economic growth," Ecological Economics, Elsevier, vol. 64(4), pages 867-880, February.
  3. Shahida Wizarat, 2013. "Natural Resources, Conflict and Growth Nexus," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(8), pages 1063-1082, August.
  4. Park, Sun-Young & Yoo, Seung-Hoon, 2013. "The economic value of LNG in the Korean manufacturing industry," Energy Policy, Elsevier, vol. 58(C), pages 403-407.
  5. Edward Barbier, 2007. "Frontiers and sustainable economic development," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 37(1), pages 271-295, May.
  6. Barbier, Edward B. & Damania, Richard & Leonard, Daniel, 2005. "Corruption, trade and resource conversion," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 276-299, September.

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