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Natural Resources And International Capital Flows

  • MAGDEFRAU Melissa

    (University of Central Arkansas, USA)

  • THOMAS Snyder

    (University of Central Arkansas, USA)

Registered author(s):

    This study examines the relationship between international capital flows and natural resources, with a focus on natural resources’ detrimental effect on institutions. In a cross-country OLS regression, natural resources appear to have a negative relationship with capital inflows when institutional quality is not controlled for. However, natural resources have a positive or insignificant relationship with capital inflows when institutions are controlled for. In a two-stage OLS regression, natural resources have a negative relationship with capital inflows through its negative effect on institutions. The measurement of institutions is taken from the Economic Freedom index by the Frasier Institute, while four different measurements of natural resource abundance are used. In particular, agriculture abundance has an indirect negative effect on capital inflows through its detrimental effect on economic freedom.

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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/836magdefrau&thomas.pdf
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    Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

    Volume (Year): 8 (2013)
    Issue (Month): 3 (Decembre)
    Pages: 56-71

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    Handle: RePEc:blg:journl:v:8:y:2013:i:3:p:56-71
    Contact details of provider: Postal: Lucian Blaga University of Sibiu, Faculty of Economic Sciences Dumbravii Avenue, No 17, postal code 550324, Sibiu, Romania
    Phone: 004 0269 210375
    Fax: 004 0269 210375
    Web page: http://economice.ulbsibiu.ro/
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    1. Thorvaldur Gylfason & Gylfi Zoega, 2001. "Natural Resources and Economic Growth: The Role of Investment," EPRU Working Paper Series 01-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    2. James L. Butkiewicz & Halit Yanikkaya, 2010. "Minerals, Institutions, Openness, and Growth: An Empirical Analysis," Land Economics, University of Wisconsin Press, vol. 86(2), pages 313-328.
    3. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2005. "Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation," NBER Working Papers 11901, National Bureau of Economic Research, Inc.
    4. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    5. Gylfason, Thorvaldur, 2004. "Natural Resources and Economic Growth: From Dependence to Diversification," CEPR Discussion Papers 4804, C.E.P.R. Discussion Papers.
    6. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-48, December.
    7. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
    8. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    9. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
    10. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
    11. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
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