The Relative Richness of the Poor? Natural Resources, Human Capital and Economic Growth
AbstractWhat 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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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 139.
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- Bravo-Ortega, Claudio & de Gregorio, Jose, 2005. "The relative richness of the poor? natural resources, human capital, and economic growth," Policy Research Working Paper Series 3484, The World Bank.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-14 (All new papers)
- NEP-DEV-2002-03-14 (Development)
- NEP-ENV-2002-03-14 (Environmental Economics)
- NEP-LAM-2002-03-14 (Central & South America)
- NEP-RES-2002-03-14 (Resource Economics)
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