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Resource windfalls, innovation, and growth

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  • Elissaios Papyrakis

Abstract

This paper explores the connection between resource abundance and innovation, as a transmission mechanism that can elucidate part of the resource curse hypothesis, i.e. the observed negative impact of resource wealth on income growth. We develop a variation of the Ramsey-Cass-Koopmans model with endogenous growth to explain the phenomenon. In this model, consumers trade off leisure versus consumption, and firms trade off innovation efforts versus manufacturing. We show that an increase in resource income frustrates economic growth in two ways: directly by reducing work effort and indirectly by inducing a smaller proportion of the labor force to engage in innovation.

Suggested Citation

  • Elissaios Papyrakis, 2011. "Resource windfalls, innovation, and growth," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 14(4), pages 301-312, December.
  • Handle: RePEc:taf:jpolrf:v:14:y:2011:i:4:p:301-312
    DOI: 10.1080/17487870.2011.595570
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    File URL: http://hdl.handle.net/10.1080/17487870.2011.595570
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    Cited by:

    1. Brutschin, Elina & Fleig, Andreas, 2016. "Innovation in the energy sector – The role of fossil fuels and developing economies," Energy Policy, Elsevier, vol. 97(C), pages 27-38.
    2. Parcero, Osiris J. & Papyrakis, Elissaios, 2016. "Income inequality and the oil resource curse," Resource and Energy Economics, Elsevier, vol. 45(C), pages 159-177.

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