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Open Questions about the Link Between Natural Resources and Economic Growth: Sachs and Warner Revisited

Listed author(s):
  • Daniel Lederman
  • William Maloney

What makes the work of Sachs and Warner (1995a, 1997a, 1997b, 1999) distinct from previous pessimistic arguments about the growth potential of natural resources is their reliance on econometric analysis. Our aim is to take the authors’ model specification as given, but we ask the following three questions:1. Is the negative effect of natural resource exports (as a share of GDP) sensitive to the time period used in the analysis? 2. Is this result sensitive to unknown omitted variables? 3. Is this result sensitive to endogeneity problems that afflict the traditional cross-sectional growth regressions? The main findings are that the SW result concerning the alleged negative effect of natural resource exports on growth does not pass the test of time, the NRX effect is probably due to unaccounted countryspecific effects, and dealing with endogeneity issues does not recover the SW result. However, we find that export revenue concentration does have quite a robust negative effect on economic growth. And ab out 50% of this effect is due to the negative correlation between export concentration and intraindustry trade and a positive correlation between export concentration and volatility of the real effective exchange rate.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 141.

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Date of creation: Feb 2002
Handle: RePEc:chb:bcchwp:141
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  1. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
  2. Malcolm Knight & Norman Loayza & Delano Villanueva, 1993. "Testing the Neoclassical Theory of Economic Growth: A Panel Data Approach," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 512-541, September.
  3. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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