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The Role of Natural Resources in Economic Development

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  • Edward B. Barbier

Abstract

In recent years economists have recognized that, along with physical and human capital, environmental resources should be viewed as important economic assets, which can be called natural capital. However, the services provided by natural capital are unique. They include the use of resources for material and energy inputs, the "assimilative capacity" to absorb waste, and the provision of ecological services. The latter services are particularly not well understood, and lie at the heart of the debate over the role of natural capital in sustainable development. That is, does the environment have a unique or "essential" role in sustaining human welfare, and if so, are special "compensation rules" required to ensure that future generations are not made worse off by natural capital depletion today? A further debate has emerged over whether environmental degradation in an economy may initially increase, but eventually declines, as per capita income increases. This hypothesis, called the environmental Kuznets curve (EKC) has led to a number of attempts to estimate empirically an "inverted U" shaped relationship between a variety of indicators of environmental pollution or resource depletion and the level of per capita income. Finally, recent economic theories and empirical evidence have questioned whether poorer economies that are endowed with abundant natural resources develop more rapidly than economies that are relatively resource poor. It is possible that resource abundant economies are not reinvesting the rents generated from natural resource exploitation into productive assets, or that resource booms actually divert economic resources from more productive and innovative sectors. The result is a "boom and bust" pattern of economic development. There is evidence of this phenomenon particularly with regard to economic development and land expansion, especially in Latin America. Overall, although our understanding of the r
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  • Edward B. Barbier, 2003. "The Role of Natural Resources in Economic Development," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 253-272, June.
  • Handle: RePEc:bla:ausecp:v:42:y:2003:i:2:p:253-272
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Edward B. Barbier, 2008. "Trade, Natural Resources and Developing Countries," Chapters,in: Handbook on Trade and the Environment, chapter 5 Edward Elgar Publishing.
    2. Costantini, Valeria & Monni, Salvatore, 2008. "Environment, human development and economic growth," Ecological Economics, Elsevier, vol. 64(4), pages 867-880, February.
    3. Krystof Obidzinski & Ahmad Dermawan & Adi Hadianto, 2014. "Oil palm plantation investments in Indonesia’s forest frontiers: limited economic multipliers and uncertain benefits for local communities," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(6), pages 1177-1196, December.
    4. Barbier, Edward B. & Damania, Richard & Leonard, Daniel, 2005. "Corruption, trade and resource conversion," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 276-299, September.
    5. Prof. Dr Shahida Wizarat, 2014. "Natural Resources, Conflict and Growth: Uncovering the Transmission Mechanism," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(8), pages 987-1000, August.
    6. Shahida Wizarat, 2013. "Natural Resources, Conflict and Growth Nexus," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(8), pages 1063-1082, August.
    7. repec:eee:enepol:v:107:y:2017:i:c:p:507-523 is not listed on IDEAS
    8. Edward Barbier, 2007. "Frontiers and sustainable economic development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 271-295, May.
    9. Farwa Amjad & Bilal Mehmood, 2016. "Dynamics of FDI, Technological Transformation and Environmental Degradation in Developing Countries: A Panel Analysis," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 3-24, March.
    10. Ulla Lehmijoki, 2004. "On the Beach? Sustainability, Optimal Pollution, and Optimal Population," DEGIT Conference Papers c009_039, DEGIT, Dynamics, Economic Growth, and International Trade.
    11. Barbier,Edward B., 2007. "Natural Resources and Economic Development," Cambridge Books, Cambridge University Press, number 9780521706513, March.
    12. Isabel Álvarez González & Romilio Labra, 2013. "Identifying the role of natural resources in knowledge-based strategies of development," Working Papers del Instituto Complutense de Estudios Internacionales 1305, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    13. Eregha, P.B. & Mesagan, Ekundayo Peter, 2016. "Oil resource abundance, institutions and growth: Evidence from oil producing African countries," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 603-619.
    14. Jean-Louis Combes & Pascale Combes Motel & Philippe Delacote, 2014. "Public expenses, credit and natural capital: Substitution or complementarity?," Working Papers halshs-00979191, HAL.
    15. Wizarat, Shahida, 2013. "Are resource abundant countries afflicted by the resource curse?," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 3(2), pages 24-39.
    16. Park, Sun-Young & Yoo, Seung-Hoon, 2013. "The economic value of LNG in the Korean manufacturing industry," Energy Policy, Elsevier, vol. 58(C), pages 403-407.
    17. Ulla Lehmijoki, 2012. "Optimal Pollution, Optimal Population, and Sustainability," DEGIT Conference Papers c017_044, DEGIT, Dynamics, Economic Growth, and International Trade.

    More about this item

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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