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Growth in an oil abundant economy: The case of Venezuela

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Author Info
Betty Agnani () (Universidad del País Vasco)
Amaia Iza () (Universidad del País Vasco)

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Abstract

Venezuela's growth experience over the past fifty years is characterized by a high economic growth rate from 1950 to 1970 and a low economic growth rate in the last thirty years. Although Venezuela is an oil abundant economy, this growth experience is largely accounted for by the evolution of its real non-oil GDP. We use growth accounting to quantify the extent to which the growth experience in non-oil sector is due to physical capital accumulation and we find that whereas in the period 1950-1980 most of the growth experience is accounted for by the evolution of TFP, this is not the case in the period 1980-1998. Nonetheless, the Venezuelan GDP is mainly driven by non-oil GDP; the use of oil revenues by the government may help us to understand, at least in part, the growth experience of the non-oil sector of the Venezuelan economy. Through the calculation of some correlations, we find a positive correlation of oil rents with physical capital, and of oil rents with non-oil TFP in the period 1950-1970, when the flow of oil rents was relatively high (the good times). However, in the period 1971-1998, there is a negative correlation of oil rents with non-oil TFP and with physical capital. Finally, we construct a simple growth model to study the effect of the oil rents, managed by the government, on private physical capital accumulation.

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Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 200515.

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Date of creation: 22 Sep 2005
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Handle: RePEc:ehu:dfaeii:200515

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Postal: Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Keywords: non-renewable resources; growth accounting; TFP; oil rents;

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Find related papers by JEL classification:
O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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  1. Mohsen Mehrara*, Mohsen & Alhosseini, Seyedmohammadsadegh & Bahramirad, Duman, 2008. "Resource curse and institutional quality in oil countries," MPRA Paper 16456, University Library of Munich, Germany, revised Mar 2009. [Downloadable!]
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