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Natural resources, incentives and human capital: reinterpreting the curse

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  • Salim M. Araji
  • Hamid Mohtadi

Abstract

We show that natural resource rents when distributed as lump-sum transfers to individuals distort the incentive to invest in tertiary education. Developing an overlapping generations model for the case of natural resource rents we show that if transfers from natural resource wealth occur when a country's technology level is marginal, the chance that the country will be caught in a low-level equilibrium trap is high. Using data for 46 countries for which data are available over time, we find strong empirical support for the model in both dynamic panel estimates and cross-sectional estimates.

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  • Salim M. Araji & Hamid Mohtadi, 2018. "Natural resources, incentives and human capital: reinterpreting the curse," Middle East Development Journal, Taylor & Francis Journals, vol. 10(1), pages 1-30, January.
    • Handle: RePEc:taf:rmdjxx:v:10:y:2018:i:1:p:1-30
    DOI: 10.1080/17938120.2018.1443992
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    2. Kingsbury, Ian, 2018. "Making sense of low private returns in MENA: A human capital approach," International Journal of Educational Development, Elsevier, vol. 61(C), pages 173-183.
    3. Evans, Olaniyi, 2022. "The criticality of institutions and the macroeconomy for education outcomes in Africa," MPRA Paper 118197, University Library of Munich, Germany.
    4. Chien, FengSheng & Chau, Ka Yin & Sadiq, Muhammad & Hsu, Ching-Chi, 2022. "The impact of economic and non-economic determinants on the natural resources commodity prices volatility in China," Resources Policy, Elsevier, vol. 78(C).
    5. Alssadek, Marwan & Benhin, James, 2023. "Natural resource curse: A literature survey and comparative assessment of regional groupings of oil-rich countries," Resources Policy, Elsevier, vol. 84(C).
    6. Sperduto Luke, 2019. "Can Human Development Bonds Reduce the Agency Costs of the Resource Curse?," The Law and Development Review, De Gruyter, vol. 12(1), pages 191-245, January.
    7. Amir Mousavi & Jeremy Clark, 2021. "The effects of natural resources on human capital accumulation: A literature survey," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1073-1117, September.
    8. Jack Pegram & Gioia Falcone & Athanasios Kolios, 2018. "A Review of Job Role Localization in the Oil and Gas Industry," Energies, MDPI, vol. 11(10), pages 1-18, October.

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