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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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  1. Jean-Philippe Stijns, 2001. "Natural Resource Abundance And Economic Growth Revisited," Development and Comp Systems 0103001, EconWPA.
  2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
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  6. Rabah Arezki & Frederick van der Ploeg, 2010. "Trade policies, institutions and the natural resource curse," Applied Economics Letters, Taylor and Francis Journals, vol. 17(15), pages 1443-1451.
  7. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
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Cited by:
  1. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.

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