IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/330968.html

Inequality and Economic Growth: Do Natural Resources Matter?

Author

Listed:
  • Gylfason, Thorvaldur
  • Zoega, Gylfi

Abstract

This paper is intended to demonstrate, in theory as well as empirically, how increased dependence on natural resources tends to go along with less rapid economic growth and greater inequality in the distribution of income across countries. On the other hand, public policy in support of education can simultaneously enhance equality and growth by raising the return to working in higher technology (that is, nonprimary) industries and thus counter some of the potentially adverse effects of excessive natural resource dependence. Together, these two variables – natural resources and education – can help account for the inverse relationship between inequality and growth observed in cross-country data. Moreover, the analysis highlights the role of public revenue policy. Taxes and fees can be used to reduce the attractiveness of primarysector employment, lift the marginal productivity of capital in higher technology industries and thus increase the rate of interest and economic growth, while reducing the inequality of income and wealth.

Suggested Citation

  • Gylfason, Thorvaldur & Zoega, Gylfi, 2002. "Inequality and Economic Growth: Do Natural Resources Matter?," Conference papers 330968, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330968
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/330968/files/432.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nordhaus, William D, 1993. "Optimal Greenhouse-Gas Reductions and Tax Policy in the "Dice" Model," American Economic Review, American Economic Association, vol. 83(2), pages 313-317, May.
    2. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
    3. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    4. A. Lans Bovenberg & Frederick van der Ploeg, 2002. "Environmental Policy, Public Finance and the Labour Market in a Second-Best World," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 6, pages 112-153, Edward Elgar Publishing.
    5. Thorvaldur Gylfason & Tryggvi Thor Herbertsson & Gylfi Zoega, 2001. "Ownership and Growth," The World Bank Economic Review, World Bank, vol. 15(3), pages 431-43-449.
    6. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
    7. Saint-Paul, Gilles & Verdier, Thierry, 1993. "Education, democracy and growth," Journal of Development Economics, Elsevier, vol. 42(2), pages 399-407, December.
    8. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
    9. Lawrence H. Goulder, 1994. "Energy Taxes: Traditional Efficiency Effects and Environmental Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 105-158, National Bureau of Economic Research, Inc.
    10. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    11. Garcia-Penalosa, Cecilia, 1995. "The Paradox of Education or the Good Side of Inequality," Oxford Economic Papers, Oxford University Press, vol. 47(2), pages 265-285, April.
    12. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    13. Paul, Gilles Saint & Verdier, Thierry, 1996. "Inequality, redistribution and growth: A challenge to the conventional political economy approach," European Economic Review, Elsevier, vol. 40(3-5), pages 719-728, April.
    14. Erkki Koskela & Ronnie Schöb, 2002. "Alleviating Unemployment: The Case for Green Tax Reforms," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 20, pages 355-378, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joël Hellier & Stéphane Lambrecht, 2013. "Inequality, Growth and Welfare: The Main Links," Palgrave Macmillan Books, in: Joël Hellier & Nathalie Chusseau (ed.), Growing Income Inequalities, chapter 9, pages 274-311, Palgrave Macmillan.
    2. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    3. Ms. Valerie Cerra & Mr. Ruy Lama & Norman Loayza, 2021. "Links Between Growth, Inequality, and Poverty: A Survey," IMF Working Papers 2021/068, International Monetary Fund.
    4. Atolia, Manoj & Chatterjee, Santanu & Turnovsky, Stephen J., 2012. "Growth and inequality: Dependence on the time path of productivity increases (and other structural changes)," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 331-348.
    5. Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 269-289, January.
    6. Oded Galor, 2009. "Inequality and Economic Development: An Overview," Working Papers 2009-3, Brown University, Department of Economics.
    7. Ugo Panizza, 1999. "Desigualdad del ingreso y crecimiento económico: elementos de juicio de datos de USA," Research Department Publications 4179, Inter-American Development Bank, Research Department.
    8. Cristiano Perugini & Gaetano Martino, 2008. "Income Inequality Within European Regions: Determinants And Effects On Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 373-406, September.
    9. Klaus Schmidt-Hebbel & José-Carlos Tello, 2014. "The Political Economy of Growth, Inequality, the Size and Composition of Government Spending," Working Papers 19, Peruvian Economic Association.
    10. Mehmet Balcilar & Rangan Gupta & Wei Ma & Philton Makena, 2021. "Income inequality and economic growth: A re‐examination of theory and evidence," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 737-757, May.
    11. Oded, Galor, 2011. "Inequality, Human Capital Formation, and the Process of Development," Handbook of the Economics of Education, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 441-493, Elsevier.
    12. Kirill Borissov & Stefano Bosi & Thai Ha-Huy & Leonor Modesto, 2017. "Heterogeneous Human Capital, Inequality and Growth: The Role of Patience and Skills," EUSP Department of Economics Working Paper Series 2017/03, European University at St. Petersburg, Department of Economics.
    13. Gylfason, Thorvaldur, 2008. "Development and Growth in Mineral-Rich Countries," CEPR Discussion Papers 7031, C.E.P.R. Discussion Papers.
    14. Andrew Berg & Jonathan D. Ostry & Charalambos G. Tsangarides & Yorbol Yakhshilikov, 2018. "Redistribution, inequality, and growth: new evidence," Journal of Economic Growth, Springer, vol. 23(3), pages 259-305, September.
    15. Panizza, Ugo, 2002. "Income Inequality and Economic Growth: Evidence from American Data," Journal of Economic Growth, Springer, vol. 7(1), pages 25-41, March.
    16. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.
    17. Veronica Amarante, 2014. "Revisiting Inequality and Growth: Evidence for Developing Countries," Growth and Change, Wiley Blackwell, vol. 45(4), pages 571-589, December.
    18. Andros Kourtellos & Charalambos G. Tsangarides, 2022. "Robust Correlates of Growth Spells: Do Inequality and Redistribution Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(6), pages 1302-1328, December.
    19. Seher Gülşah Topuz, 2022. "The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(3), pages 1177-1231, August.
    20. David Castells-Quintana & Vicente Royuela, 2017. "Tracking positive and negative effects of inequality on long-run growth," Empirical Economics, Springer, vol. 53(4), pages 1349-1378, December.

    More about this item

    Keywords

    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:330968. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.