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Natural Resources And International Capital Flows

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  • MAGDEFRAU Melissa

    (University of Central Arkansas, USA)

  • THOMAS Snyder

    (University of Central Arkansas, USA)

Abstract

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.

Suggested Citation

  • MAGDEFRAU Melissa & THOMAS Snyder, 2013. "Natural Resources And International Capital Flows," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(3), pages 56-71, Decembre.
  • Handle: RePEc:blg:journl:v:8:y:2013:i:3:p:56-71
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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/836magdefrau&thomas.pdf
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    References listed on IDEAS

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    7. 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.
    8. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
    9. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April.
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    12. 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.
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    Keywords

    Natural Resources; Capital Flows; Institutions;

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