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Public capital in resource rich economies: is there a curse?

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  • Sambit Bhattacharyya
  • Paul Collier

Abstract

As poor countries deplete their natural resources, for increased consumption to be sustainable some of the revenues should be invested in other public assets. Further, since such countries typically have acute shortages of public capital, the finance from resource depletion is an opportunity for needed public investment. Using a new global panel dataset on public capital and resource rents covering the period 1970 to 2005 we find that, contrary to these expectations, resource rents significantly reduce the public capital stock. This is more direct evidence for a policy-based 'resource curse' than the conventional, indirect evidence from the relationships between resource endowments, growth and income. The adverse effect on public capital is mitigated by good institutions. We also find that rents from the depletion of non-renewable (mineral) resources reduce the public capital stock whereas rents from sustainable (forestry and agriculture) sources do not. Copyright 2014 Oxford University Press 2013 All rights reserved, Oxford University Press.

Suggested Citation

  • Sambit Bhattacharyya & Paul Collier, 2014. "Public capital in resource rich economies: is there a curse?," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 1-24, January.
    • Handle: RePEc:oup:oxecpp:v:66:y:2014:i:1:p:1-24
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    File URL: http://hdl.handle.net/10.1093/oep/gps073
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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