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

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  • Daniel Lederman
  • William Maloney

Abstract

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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  • Daniel Lederman & William Maloney, 2002. "Open Questions about the Link Between Natural Resources and Economic Growth: Sachs and Warner Revisited," Working Papers Central Bank of Chile 141, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:141
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    Cited by:

    1. Rodrigo Fuentes & Roberto Álvarez, 2006. "Paths of Development, Specialization, and Natural Resources Abundance," Working Papers Central Bank of Chile 383, Central Bank of Chile.
    2. Farid Gasmi & Laura Recuero Virto & Denis Couvet, 2020. "The Impact of Renewable Versus Non-renewable Natural Capital on Economic Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(2), pages 271-333, October.
    3. Lay, Jann & Omar Mahmoud, Toman, 2004. "Bananas, oil, and development: examining the resource curse and its transmission channels by resource type," Kiel Working Papers 1218, Kiel Institute for the World Economy (IfW Kiel).
    4. Khalid R. Alkhater, 2012. "The Rentier Predatory State Hypothesis: An Empirical Explanation Of The Resource Curse," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(4), pages 29-60, December.
    5. William F. Maloney, 2002. "Missed Opportunities: Innovation and Resource-Based Growth in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2002), pages 111-168, August.
    6. Rabah Arezki & Frederick van der Ploeg, 2007. "Can the Natural Resource Curse Be Turned into a Blessing? The Role of Trade Policies and Institutions," Economics Working Papers ECO2007/35, European University Institute.
    7. Ricardo Caballero G, 2002. "Coping With Chile’s External Vulnerability: A Financial Problem," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(1), pages 11-36, April.
    8. Graham A. Davis & John E. Tilton, 2005. "The resource curse," Natural Resources Forum, Blackwell Publishing, vol. 29(3), pages 233-242, August.
    9. Bedassa Tadesse & Elias K. Shukralla, 2013. "The impact of foreign direct investment on horizontal export diversification: empirical evidence," Applied Economics, Taylor & Francis Journals, vol. 45(2), pages 141-159, January.
    10. Yacine Belarbi & Lylia Sami & Said Souam, 2015. "Effects of Institutions and Natural Resources in a Multiple Growth Regime," Working Papers 905, Economic Research Forum, revised Apr 2015.
    11. Wim Naudé & Riaan Rossouw, 2011. "Export diversification and economic performance: evidence from Brazil, China, India and South Africa," Economic Change and Restructuring, Springer, vol. 44(1), pages 99-134, April.
    12. Tsani, Stella, 2013. "Natural resources, governance and institutional quality: The role of resource funds," Resources Policy, Elsevier, vol. 38(2), pages 181-195.
    13. Jing Ma & Young-Gyun Ahn & Min-Kyu Lee, 2022. "The Interactive Influence of Institutional Quality and Resource Dependence on Regional Economic Growth: Evidence from China’s Resource-Based Provinces," Sustainability, MDPI, vol. 14(10), pages 1-15, May.
    14. Nebojsa Stojcic & Edvard Orlic, 2016. "Foreign Direct Investment And Structural Transformation Of Exports," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 25(2), pages 355-378, december.
    15. Malebogo Bakwena & Philip Bodman & Thanh Le & KK Tang, "undated". "Avoiding the Resource Curse: The Role of Institutions," MRG Discussion Paper Series 3209, School of Economics, University of Queensland, Australia.
    16. Wim Naudé & Riaan Rossouw, 2008. "Export Diversification and Specialization in South Africa: Extent and Impact," WIDER Working Paper Series RP2008-93, World Institute for Development Economic Research (UNU-WIDER).
    17. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.
    18. Mirzat Ullah & Hafiz M. Sohail & Hossam Haddad & Nidal Mahmoud Al-Ramahi & Mohammed Arshad Khan, 2022. "Global Structural Shocks and FDI Dynamic Impact on Productive Capacities: An Application of CS-ARDL Estimation," Sustainability, MDPI, vol. 15(1), pages 1-13, December.
    19. Herzer Dierk, 2005. "Exportdiversifizierung und Wirtschaftswachstum in Chile / Export Diversification and Economic Growth in Chile: Eine ökonometrische Analyse / An Econometric Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(2), pages 163-180, April.

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