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Natural Resources, Innovation, and Growth

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  • Elissaios Papyrakis

    (IVM/VU Institute for Environmental Studies, Vrije Universiteit)

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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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    Bibliographic Info

    Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.129.

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    Date of creation: Oct 2004
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    Handle: RePEc:fem:femwpa:2004.129

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    Keywords: Natural resources; Growth; Innovation;

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    1. Gylfason, Thorvaldur, 2001. "Nature, Power, and Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(5), pages 558-88, November.
    2. 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.
    3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
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    17. S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
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