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Catch-Up and the Curse of Oil

Author

Listed:
  • Thorvaldur Gylfason
  • Gylfi Zoega

Abstract

Because of convergence, initial income is an important explanatory variable in many growth regressions. Its omission can lead to misspecification bias that may seem to – but still does not – contradict the common albeit somewhat controversial empirical finding that natural resources, if not well managed, tend to depress incomes and growth. We illustrate the bias using simple algebra and cross-country regression analysis with two different data sets: old and new. We distinguish between natural resource abundance and dependence and propose a method for identifying the level of national income at which the net effects of natural resources shift from adverse to advantageous.

Suggested Citation

  • Thorvaldur Gylfason & Gylfi Zoega, 2026. "Catch-Up and the Curse of Oil," CESifo Working Paper Series 12448, CESifo.
    • Handle: RePEc:ces:ceswps:_12448
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp12448.pdf
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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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