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The relative richness of the poor? natural resources, human capital, and economic growth

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Bravo-Ortega, Claudio
de Gregorio, Jose

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Abstract

Are natural resources a blessing or a curse? The authors present a model in which natural resources have a positive effect on the level of income and a negative effect on its growth rate. The positive and permanent effect on income implies a welfare gain. There is a growth effect stemming from a composition effect. However, the authors show that this effect can be offset by having a large level of human capital. They test their model using panel data for the period 1970-90. They extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that high levels of human capital may outweigh the negative effects of the natural resource abundance on growth. The authors also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well-endowed with natural resources, shows how it is possible to grow fast based on natural resources.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3484.

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Date of creation: 01 Jan 2005
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Handle: RePEc:wbk:wbrwps:3484

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Keywords: Capital Markets and Capital Flows; Economic Theory&Research; Decentralization; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Economic Growth; Inequality; Governance Indicators;

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christa N. Brunnschweiler & Erwin H. Bulte, 2006. "The Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings," Economics working paper series 06/61, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  2. James L. Butkiewicz & Halit Yanikkaya, 2007. "Minerals, Openness, Institutions and Growth: An Empirical Analysis," Working Papers 07-04, University of Delaware, Department of Economics. [Downloadable!]
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    Other versions:
  4. Jose De Gregorio, 2004. "Economic Growth in Chile: Evidence, Sources and Prospects," Working Papers Central Bank of Chile 298, Central Bank of Chile. [Downloadable!]
  5. Jose De Gregorio, 2003. "The Role of Foreign Direct Investment and Natural Resources in Economic Development," Working Papers Central Bank of Chile 196, Central Bank of Chile. [Downloadable!]
  6. Ulrich H. Klueh & Alonso Segura & Walter Zarate & Gonzalo C. Pastor, 2007. "Inter-Sectoral Linkages and Local Content in Extractive Industries and Beyond--The Case of Sao Tome and Principe," IMF Working Papers 07/213, International Monetary Fund. [Downloadable!]
  7. Luis Felipe Céspedes C. & David Rappoport W, 2006. "El Fondo Gubernamental de Petróleo de Noruega," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(1), pages 71-78, April. [Downloadable!]
  8. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Papers 03/139, International Monetary Fund. [Downloadable!]
    Other versions:
  9. César Calderón & Rodrigo Fuentes, 2005. "Cuanto Explican las Reformas y la Calidad de las Instituciones el Crecimiento Chileno? Una Comparación Internacional," Working Papers Central Bank of Chile 314, Central Bank of Chile. [Downloadable!]
  10. Christa N. Brunnschweiler, 2006. "Cursing the blessings? Natural resource abundance, institutions, and economic growth," Economics working paper series 06/51, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  11. Ian W. McLean, 2005. "Why Was Australia So Rich?," Development and Comp Systems 0509003, EconWPA. [Downloadable!]
  12. Elena Suslova & Natalya Volchkova, 2007. "Human Capital, Industrial Growth and Resource Curse," Working Papers WP13_2007_11, Laboratory for Macroeconomic Analysis. [Downloadable!]
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