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Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites

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  • Falkinger, Josef

    (University of Zurich)

  • Grossmann, Volker

    (University of Fribourg)

Abstract

This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.

Suggested Citation

  • Falkinger, Josef & Grossmann, Volker, 2005. "Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites," IZA Discussion Papers 1756, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1756
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    Cited by:

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    3. Marcelo M. Giugale & Nga Thi Viet Nguyen, 2018. "Money to the people: a calculation of direct dividend payments in Africa," International Economics and Economic Policy, Springer, vol. 15(1), pages 1-19, January.
    4. Juan A. Meza Fregoso & Karla S. Barron Arreola & Jose Urciaga Garcia, 2012. "Natural Resources And Economic Growth: Analyzing Human Capital In Mexico, Recursos Naturales Y Crecimiento Economico, Analizando El Capital Humano En Mexico," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 5(1), pages 93-102.
    5. Raymond E. Gaspar, 2017. "Large firm dominance on country’s entrepreneurship potentials," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-16, December.

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    More about this item

    Keywords

    oligopsony power; institutions; entrepreneurship; economic development; distribution; credit constraints; political elites;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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