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How should resource‐rich countries diversify? Estimating forward‐linkage effects of mining on productivity growth

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  • Omar Joya

Abstract

Resource‐rich countries willing to diversify their economies are faced with dual policy options; to either develop resource‐based industries, or diversify their economies as a whole and invest into new activities that are not necessarily resource dependent. Not only does the economic theory fail to provide a consensual guidance on this issue but empirical evidence is also lacking. This paper empirically assesses which of these two patterns of diversification is associated with higher productivity growth outcomes for resource‐rich countries. Using panel data for 50 resource‐abundant countries over the period 1970–2010, I find that stronger downstream linkages to mining and extractives do not lead to productivity enhancements. Broadening and diversifying the production structure as a whole offers potential for productivity growth at higher levels of income.

Suggested Citation

  • Omar Joya, 2019. "How should resource‐rich countries diversify? Estimating forward‐linkage effects of mining on productivity growth," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(2), pages 457-473, February.
    • Handle: RePEc:wly:ectrin:v:27:y:2019:i:2:p:457-473
    DOI: 10.1111/ecot.12191
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    References listed on IDEAS

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    Cited by:

    1. Joya, Omar & Rougier, Eric, 2019. "Do (all) sectoral shocks lead to aggregate volatility? Empirics from a production network perspective," European Economic Review, Elsevier, vol. 113(C), pages 77-107.

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