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Nature, Power, and Growth

  • Gylfason, Thorvaldur

This essay reviews the relationship between natural-resource abundance and economic growth around the world, and presents some new results. The principal reasons why resource-based production can inhibit economic growth over long periods are traced to the Dutch disease, neglect of education, rent seeking, and economic policy failures. Across a large number of countries in the period from 1965 to 1998, the share of the primary sector in the labour force is shown to be inversely related to exports, domestic and foreign investment, and education, and directly related to external debt, import protection, corruption, and income inequality. The cross-sectional data show, moreover, that the share of the primary sector in the labour force is inversely related to per capita growth across countries. None of this lies in the nature of things, however. What seems to matter for economic growth is not the abundance of natural resources per se, but rather the quality of their management, and of economic management and institutions in general. Copyright 2001 by Scottish Economic Society.

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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 48 (2001)
Issue (Month): 5 (November)
Pages: 558-88

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Handle: RePEc:bla:scotjp:v:48:y:2001:i:5:p:558-88
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  1. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor, 2001. "Does inflation matter for growth?," Japan and the World Economy, Elsevier, vol. 13(4), pages 405-428, December.
  2. Thorvaldur Gylfason & Gylfi Zoega, 2004. "Natural Resources and Economic Growth: The Role of Investment," DEGIT Conference Papers c009_011, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Paldam, Martin, 1997. "Dutch disease and rent seeking: The Greenland model," European Journal of Political Economy, Elsevier, vol. 13(3), pages 591-614, September.
  4. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
  5. Thorvaldur Gylfason, 2001. "Nature, Power, and Growth," CESifo Working Paper Series 413, CESifo Group Munich.
  6. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  7. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-71, September.
  8. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  9. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  10. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  11. Robert E. Hall & Charles I. Jones, . "The Productivity of Nations," Working Papers 96012, Stanford University, Department of Economics.
  12. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
  13. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. " Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
  14. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Herbertsson, Tryggvi Thor & Skuladottir, Marta & Zoega, Gylfi, 2000. "Three Symptoms And A Cure: A Contribution To The Economics Of The Dutch Disease," CEPR Discussion Papers 2364, C.E.P.R. Discussion Papers.
  16. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  17. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1997. "A Mixed Blessing: Natural Resources and Economic Growth," CEPR Discussion Papers 1668, C.E.P.R. Discussion Papers.
  18. Jeffrey D. Sachs, 1989. "Social Conflict and Populist Policies in Latin America," NBER Working Papers 2897, National Bureau of Economic Research, Inc.
  19. Paldam, Martin & Svendsen, Gert Tinggaard, 2000. "An essay on social capital: looking for the fire behind the smoke," European Journal of Political Economy, Elsevier, vol. 16(2), pages 339-366, June.
  20. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-80, November.
  21. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
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  25. repec:cup:macdyn:v:3:y:1999:i:2:p:204-25 is not listed on IDEAS
  26. Jonathan Temple & Paul A. Johnson, 1998. "Social Capability And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 965-990, August.
  27. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1999. "A Mixed Blessing," Macroeconomic Dynamics, Cambridge University Press, vol. 3(02), pages 204-225, June.
  28. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  29. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  30. Auty, Richard M., 1994. "Industrial policy reform in six large newly industrializing countries: The resource curse thesis," World Development, Elsevier, vol. 22(1), pages 11-26, January.
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