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Resource abundance, growth and welfare: A Schumpeterian perspective

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  • Peretto, Pietro F.

Abstract

This paper takes a new look at the long-run implications of resource abundance. It develops a Schumpeterian model of endogenous growth that incorporates an upstream resource-intensive sector and yields an analytical solution for the transition path. It then derives conditions under which, as the economy's endowment of a natural resource rises, (i) growth accelerates and welfare rises, (ii) growth decelerates but welfare rises nevertheless, and (iii) growth decelerates and welfare falls. Which of these scenarios prevails depends on the response of the natural resource price to an increase in the resource endowment. The price response determines the change in income earned by the owners of the resource (the households) and thereby the change in their expenditure on manufacturing goods. Since manufacturing is the economy's innovative sector, this income-to-expenditure effect links resource abundance to the size of the market for manufacturing goods and drives how re-source abundance affects incentives to undertake innovative activity.

Suggested Citation

  • Peretto, Pietro F., 2012. "Resource abundance, growth and welfare: A Schumpeterian perspective," Journal of Development Economics, Elsevier, vol. 97(1), pages 142-155.
  • Handle: RePEc:eee:deveco:v:97:y:2012:i:1:p:142-155 DOI: 10.1016/j.jdeveco.2010.12.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pietro Peretto & Simone Valente, 2015. "Growth on a finite planet: resources, technology and population in the long run," Journal of Economic Growth, Springer, vol. 20(3), pages 305-331, September.
    2. Le, Thanh & Le Van, Cuong, 2016. "Transitional dynamics in an R&D-based growth model with natural resources," Mathematical Social Sciences, Elsevier, pages 1-17.
    3. Antoci, Angelo & Russu, Paolo & Sordi, Serena & Ticci, Elisa, 2014. "Industrialization and environmental externalities in a Solow-type model," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 211-224.
    4. Suphaphiphat, Nujin & Peretto, Pietro F. & Valente, Simone, 2015. "Endogenous growth and property rights over renewable resources," European Economic Review, Elsevier, pages 125-151.
    5. repec:hal:journl:halshs-01114589 is not listed on IDEAS
    6. Quamrul Ashraf & Stelios Michalopoulos, 2015. "Climatic Fluctuations and the Diffusion of Agriculture," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 589-609, July.
    7. Vaz, Paulo Henrique, 2017. "Discovery of natural resources: A class of general equilibrium models," Energy Economics, Elsevier, vol. 61(C), pages 174-178.
    8. Klarizze Anne Martin Puzon, 2013. "Cost-Reducing R&D in the Presence of an Appropriation Alternative: An Application to the Natural Resource Curse," Working Papers 2013.30, Fondazione Eni Enrico Mattei.
    9. Thanh Le & Cuong Le Van, 2014. "Natural Resources, R&D and Economic Growth," Working Papers 2014-112, Department of Research, Ipag Business School.
    10. Angelo Antoci & Paolo Russu & Serena Sordi & Elisa Ticci, 2012. "The interaction between natural resources- and physical capital-intensive sectors in a behavioral model of economic growth," Department of Economics University of Siena 661, Department of Economics, University of Siena.
    11. Lucas Bretschger & Simone Valente, 2016. "Productivity Gaps and Tax Policies Under Asymmetric Trade," CER-ETH Economics working paper series 16/239, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    Keywords

    Endogenous growth; Endogenous technological change; Natural resources;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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