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Abstract

This paper investigates the connection between resource abundance and innovation, as a transmission mechanism that can elucidate part of the resource curse hypothesis; i.e. the observed negative impact of resource wealth on income growth. We develop a variation of the Ramsey-Cass-Koopmans model with endogenous growth to explain the phenomenon. In this model, consumers trade off leisure versus consumption, and firms trade off innovation efforts versus manufacturing. For this model, we show that an increase in resource income frustrates economic growth in two ways: directly by reducing work effort and indirectly by inducing a smaller proportion of the labor force to engage in innovation.

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File URL: http://www.degit.ifw-kiel.de/papers/degit_10/C010_054.pdf
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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_054.

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Length: 31 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_054

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Web page: http://www.degit.ifw-kiel.de/
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Related research

Keywords: Natural Resources; Growth; Innovation;

Find related papers by JEL classification:

• O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
• O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
• Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

This paper has been announced in the following NEP Reports:

• NEP-ALL-2006-12-01 (All new papers)
• NEP-DEV-2006-12-01 (Development)
• NEP-ENE-2006-12-01 (Energy Economics)
• NEP-ENV-2006-12-01 (Environmental Economics)
• NEP-INO-2006-12-01 (Innovation)

References

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   • Ola Olsson, 2004. "Conflict Diamonds," DEGIT Conference Papers c009_013, DEGIT, Dynamics, Economic Growth, and International Trade.
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   • Lúdvík Elíasson & Stephen J. Turnovsky, 2002. "Renewable Resources In An Endogenously Growing Economy: Balanced Growth And Transitional Dynamics," Economics wp20_ludvik, Department of Economics, Central bank of Iceland.
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12. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. " Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
13. Usui, Norio, 1997. "Dutch disease and policy adjustments to the oil boom: a comparative study of Indonesia and Mexico," Resources Policy, Elsevier, vol. 23(4), pages 151-162, December.
14. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
15. Papyrakis, Elissaios & Gerlagh, Reyer, 2004. "The resource curse hypothesis and its transmission channels," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 181-193, March.
    
    • Papyrakis, E. & Gerlagh, R., 2004. "The resource curse hypothesis and its transmission channels," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3764006, Tilburg University.
16. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
17. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
18. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
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21. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.

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