Oil Greasing the Wheels: When Do Natural Resources Become a Blessing?
AbstractThis paper considers theoretically and empirically natural resources' effect on growth using a two sector-model (resource and non-resource). Governments tax the non-resource sector and choose institutional quality, which determines productivity in the non-resource sector and the governments' ability to appropriate resource rents. Resource booms harm institutions. Their effect on growth depends on relative sector sizes: when rents are relatively substantial, governments incur the cost of corrupting institutions and the loss of taxes from the non-resource sector for a bigger share of rents. The results are confirmed using cross-country panel data: countries in the bottom quintile of the manufacturing-share of value-added are cursed by resources, other countries are blessed.
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Bibliographic InfoPaper provided by Economic Research Forum in its series Working Papers with number 439.
Length: 29 pages
Date of creation: Sep 2008
Date of revision: Sep 2008
Publication status: Published by The Economic Research Forum (ERF)
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- Klaus Schmidt-Hebbel, 2012. "Fiscal Institutions in Resource-Rich Economies: Lessons from Chile and Norway," Documentos de Trabajo 416, Instituto de Economia. Pontificia Universidad Católica de Chile..
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