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Do Natural Resources Depress Income Per Capita?

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  • Rabah Arezki
  • Frederick Van der Ploeg

Abstract

Most evidence for the resource curse comes from cross-country growth regressions suffers from a bias originating from the high and ever-evolving volatility in commodity prices. This paper addresses these issues by providing new cross-country empirical evidence for the effect of resources in income per capita. Natural resource dependence (resource exports) has a significant negative effect on income per capita, especially in countries with bad rule of law or bad policies, but these results weaken substantially once we allow for endogeneity. However, the more exogenous measure of resource abundance (stock of natural capital) has a significant negative effect on income per capita even after controlling for geography, rule of law and de facto or de jure trade openness. Furthermore, this effect is more severe for countries that have little de jure trade openness. These results are robust to using alternative measures of institutional quality (expropriation and corruption instead of rule of law).

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-05/cesifo1_wp3056.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3056.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3056

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Keywords: resource curse; institutions; trade policies; income per capita;

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References

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Citations

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Cited by:
  1. Carmignani, Fabrizio, 2013. "Development outcomes, resource abundance, and the transmission through inequality," Resource and Energy Economics, Elsevier, vol. 35(3), pages 412-428.
  2. Frederick van der Ploeg, 2008. "Challenges and Opportunities for Resource Rich Economies," OxCarre Working Papers 005, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Fidel Perez-Sebastian & Ohad Raveh, 2013. "The natural Resource Curse, Fiscal Decentralization, and Agglomeration Economies," OxCarre Working Papers 112, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  4. Thomas Goda & Alejandro Torres, 2013. "Overvaluation of the real exchange rate and the Dutch Disease: the Colombian case," DOCUMENTOS DE TRABAJO CIEF 010930, UNIVERSIDAD EAFIT.
  5. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
  6. Fabrizio Carmignani & Abdur Chowdhury, 2012. "The Geographical Dimension of the Development Effects of Natural Resources," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(4), pages 479-498, August.

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