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Natural Resources and Economic Growth: What Is the Connection?

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  • Thorvaldur Gylfason

Abstract

This paper reviews the relationship between natural resources and economic growth, and stresses how natural capital tends to crowd out foreign capital, social capital, human capital, and physical capital, thereby impeding economic growth across countries and presumably also over time. Specifically, the paper presents empirical evidence that nations with abundant natural capital tend to have (a) less trade and foreign investment, (b) more corruption, (c) less education, and (d) less domestic investment than other nations that are less well endowed with, or less dependent on, natural resources. This matters for growth because empirical evidence also indicates that trade, honesty, education, and investment are all positively and significantly related to economic growth across countries.

Suggested Citation

  • Thorvaldur Gylfason, 2001. "Natural Resources and Economic Growth: What Is the Connection?," CESifo Working Paper Series 530, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_530
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp530.pdf
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    References listed on IDEAS

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    1. Gylfason, Thorvaldur, 1999. "Exports, Inflation and Growth," World Development, Elsevier, vol. 27(6), pages 1031-1057, June.
    2. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
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    Keywords

    Natural resources; economic growth;

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