An Alternative Explanation for the Resource Curse: The Income Effect Channel
AbstractThe paper provides an alternative explanation for the "resource curse" based on the income effect resulting from high government current spending in resource rich economies. Using a simple life cycle framework, we show that private investment in the non-resource sector is adversely affected if private agents expect extra government current spending financed through resource sector revenues in the future. This income channel of the resource curse is stronger for countries with lower degrees of openness and forward altruism. We empirically validate these findings by estimating non-hydrocarbon sector growth regressions using a panel of 25 oil-exporting countries over 1992-2005.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 09/112.
Date of creation: 01 May 2009
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Other versions of this item:
- Ali Alichi & Rabah Arezki, 2012. "An alternative explanation for the resource curse: the income effect channel," Applied Economics, Taylor and Francis Journals, vol. 44(22), pages 2881-2894, August.
- Arezki, Rabah & Alichi, Ali, 2009. "An Alternative Explanation for the Resource Curse: The Income Effect Channel," MPRA Paper 17130, University Library of Munich, Germany.
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data
- C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
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