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Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with two Elites

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  • Josef Falkinger
  • Volker Grossmann

Abstract

This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.

Suggested Citation

  • Josef Falkinger & Volker Grossmann, 2005. "Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with two Elites," CESifo Working Paper Series 1562, CESifo.
    • Handle: RePEc:ces:ceswps:_1562
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    Cited by:

    1. Falkinger, Josef & Grossmann, Volker, 2013. "Oligarchic land ownership, entrepreneurship, and economic development," Journal of Development Economics, Elsevier, vol. 101(C), pages 206-215.
    2. Kai Konrad & Stergios Skaperdas, 2012. "The market for protection and the origin of the state," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 417-443, June.
    3. Marcelo M. Giugale & Nga Thi Viet Nguyen, 2018. "Money to the people: a calculation of direct dividend payments in Africa," International Economics and Economic Policy, Springer, vol. 15(1), pages 1-19, January.
    4. Juan A. Meza Fregoso & Karla S. Barron Arreola & Jose Urciaga Garcia, 2012. "Natural Resources And Economic Growth: Analyzing Human Capital In Mexico, Recursos Naturales Y Crecimiento Economico, Analizando El Capital Humano En Mexico," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 5(1), pages 93-102.
    5. Raymond E. Gaspar, 2017. "Large firm dominance on country’s entrepreneurship potentials," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-16, December.

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    More about this item

    Keywords

    credit constraints; distribution; economic development; entrepreneurship; institutions; oligopsony power; political elites;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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