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Resource Curse or Malthusian Trap? Evidence from Oil Discoveries and Extractions

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  • Anca Cotet

    ()
    (Department of Economics, Ball State University)

  • Kevin K. Tsui

    ()
    (The John E. Walker Department of Economics, Clemson University)

Abstract

This paper studies the effects of oil rent on development using a unique panel dataset describing worldwide oil discoveries and extractions. First, we revisit the so-called curse of oil, which contends that oil rent hinders economic development. Exploiting cross-country variations in the timing of oil discoveries and the size of initial oil in place, we find that, contrary to the oil-curse hypothesis, there is little robust evidence of a negative relationship between oil endowment and economic performance, even after controlling for initial income. Second, based on both cross-country and panel evidence, we find a robust association between oil abundance and population growth, which might suggest a Malthusian effect which reduces the economic growth measured in per capita GDP. We find some evidence that oil abundance increases fertility. On an accounting basis, however, migration plays an even more prominent role in explaining the oil-induced population growth. Furthermore, we show that focusing on material gain may understate the welfare gain from oil abundance, because relative to non-oil countries, oil-rich countries gain more in health improvements. These results suggest that despite the positive oil effect on population growth, oil-rich countries do not suffer from the Malthusian trap, and overall oil abundance is an economic blessing rather than a curse.

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File URL: http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp201001cotet.pdf
File Function: First version, December 2009
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Bibliographic Info

Paper provided by Ball State University, Department of Economics in its series Working Papers with number 201001.

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Length: 50 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Handle: RePEc:bsu:wpaper:201001

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Keywords: resource curse; Malthusian trap; oil discoveries;

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References

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  1. Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, Springer, vol. 8(2), pages 155-94, June.
  2. Bloom, David E. & Canning, David & Fink, Günther, 2013. "Disease and Development Revisited," IZA Discussion Papers 7391, Institute for the Study of Labor (IZA).
  3. Dan A. Black & Natalia Kolesnikova & Seth G. Sanders & Lowell J. Taylor, 2013. "Are Children “Normal”?," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 21-33, March.
  4. Michael Alexeev, Robert Conrad, 2009. "The Natural Resource Curse and Economic Transition," Caepr Working Papers, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington 2009-018, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  5. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2009. "Income and Health Spending: Evidence from Oil Price Shocks," NBER Working Papers 14744, National Bureau of Economic Research, Inc.
  6. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 18(1), pages 47-82, January.
  7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  8. Timothy Besley & Masayuki Kudamatsu, 2006. "Health and Democracy," American Economic Review, American Economic Association, vol. 96(2), pages 313-318, May.
  9. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
  10. Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115(6), pages 925-985, December.
  11. 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.
  12. Benjamin, Daniel K & Kochin, Levis A, 1982. "A Proposition on Windfalls and Taxes When Some but Not All Resources Are Mobile," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 20(3), pages 393-404, July.
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Cited by:
  1. Michel Beine & Charles S. Bos & Serge Coulombe, 2009. "Does the Canadian Economy suffer from Dutch Disease?," Tinbergen Institute Discussion Papers 09-096/4, Tinbergen Institute.
  2. Kevin K. Tsui, 2011. "More Oil, Less Democracy: Evidence from Worldwide Crude Oil Discoveries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(551), pages 89-115, March.
  3. Lifshits, Marina, 2013. "The influence of migration and natural reproduction of labor force upon economic growth in the countries of the world," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 32-51.
  4. Nuno Torres & Óscar Afonso & Isabel Soares, 2013. "A survey of literature on the resource curse: critical analysis of the main explanations, empirical tests and resource proxies," CEF.UP Working Papers 1302, Universidade do Porto, Faculdade de Economia do Porto.
  5. Brückner, Markus & Schwandt, Hannes, 2013. "Income and Population Growth," IZA Discussion Papers 7422, Institute for the Study of Labor (IZA).
  6. David Cuberes & Kevin Tsui, 2011. "Aid and Fertility: What Does the Cross-Country Evidence Show?," Working Papers 2011024, The University of Sheffield, Department of Economics.
  7. Flory Dieck-Assad & Ernesto Peralta, 2013. "Energy and capital inputs: cornerstones of productivity growth in Mexico: 1965–2004," Empirical Economics, Springer, Springer, vol. 44(2), pages 563-590, April.

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