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The Relative Richness of the Poor? Natural Resources, Human Capital and Economic Growth

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Claudio Bravo-Ortega
Jose De Gregorio

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Abstract

What is the role of natural resources in economic performance? Are there any special conditions in which natural resources can act as the engine of growth? Are natural resources a curse? In this paper we present a model where natural resources have a positive effect on level of income and a negative effect on its growth rate. However, we show that this effect can be ameliorated by having a large level of human capital. We test our model using panel data for the period 1970-1990. We extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that countries high levels of human capital may more than offset the negative effects of the natural resource abundance on growth. We also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well endowed with natural resources, which shows how it is possible to grow fast based on natural resources. Overall the em pirical evidence is consistent with the main predictions of the model.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 139.

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christa N. Brunnschweiler & Erwin H. Bulte, 2006. "The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings," Economics working paper series 06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  2. Jose De Gregorio, 2004. "Economic Growth in Chile: Evidence, Sources and Prospects," Working Papers Central Bank of Chile 298, Central Bank of Chile. [Downloadable!]
  3. Jose De Gregorio, 2003. "The Role of Foreign Direct Investment and Natural Resources in Economic Development," Working Papers Central Bank of Chile 196, Central Bank of Chile. [Downloadable!]
  4. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Papers 03/139, International Monetary Fund. [Downloadable!]
    Other versions:
  5. James L. Butkiewicz & Halit Yanikkaya, 2007. "Minerals, Openness, Institutions and Growth: An Empirical Analysis," Working Papers 07-04, University of Delaware, Department of Economics. [Downloadable!]
  6. César Calderón & Rodrigo Fuentes, 2005. "Cuanto Explican las Reformas y la Calidad de las Instituciones el Crecimiento Chileno? Una Comparación Internacional," Working Papers Central Bank of Chile 314, Central Bank of Chile. [Downloadable!]
  7. Ulrich H. Klueh & Alonso Segura & Walter Zarate & Gonzalo C. Pastor, 2007. "Inter-Sectoral Linkages and Local Content in Extractive Industries and Beyond--The Case of Sao Tome and Principe," IMF Working Papers 07/213, International Monetary Fund. [Downloadable!]
  8. Kenneth W Clements & Yihui Lan & John Roberts, 2007. "Exchange-Rate Economics for the Resources Sector," Economics Discussion / Working Papers 07-13, The University of Western Australia, Department of Economics. [Downloadable!]
  9. Christa N. Brunnschweiler, 2006. "Cursing the blessings? Natural resource abundance, institutions, and economic growth," Economics working paper series 06/51, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  10. Ian W. McLean, 2005. "Why Was Australia So Rich?," Development and Comp Systems 0509003, EconWPA. [Downloadable!]
  11. Elena Suslova & Natalya Volchkova, 2007. "Human Capital, Industrial Growth and Resource Curse," Working Papers WP13_2007_11, Laboratory for Macroeconomic Analysis. [Downloadable!]
  12. Katharina Wick, 2008. "Conflict and Production: An Application to Natural Resources," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 8(1), pages 1706-1706. [Downloadable!] (restricted)
  13. Fabrizio Carmignani & Abdur Chowdhury, 2007. "The Role of Primary Commodities in Economic Development: Sub-Saharan Africa Versus the Rest of the World," ECE Discussion Papers Series 2007_7, UNECE. [Downloadable!]
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  15. Andrea Tokman, 2004. "Education and Economic Growth in Chile," Working Papers Central Bank of Chile 289, Central Bank of Chile. [Downloadable!]
  16. Lederman, Daniel & Maloney, William F., 2008. "In search of the missing resource curse," Policy Research Working Paper Series 4766, The World Bank. [Downloadable!]
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  18. Luis Felipe Céspedes C. & David Rappoport W, 2006. "El Fondo Gubernamental de Petróleo de Noruega," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 71-78, April. [Downloadable!]
  19. Wick, Katharina, 2007. "Conflict and Production: An Application to Natural Resources," Proceedings of the German Development Economics Conference, Göttingen 2007 34, Verein für Socialpolitik, Research Committee Development Economics. [Downloadable!]
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