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Natural Resources and Economic Growth: From Dependence to Diversification

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  • Gylfason, Thorvaldur

Abstract

This Paper reviews the relationship between natural resource dependence and economic growth, and stresses how natural capital intensity tends to crowd out foreign capital, social capital, human capital, physical capital, and financial capital, thereby impeding economic growth across countries. Specifically, the Paper presents empirical cross-country evidence to the effect that nations that depend heavily on their natural resources tend to have (a) less trade and foreign investment, (b) more corruption, (c) less equality, (d) less political liberty, (e) less education, (f) less domestic investment, and (g) less financial depth than other nations that are less well endowed with, or less dependent on, natural resources. This matters for long-run growth because empirical evidence also suggests that trade, honesty, equality, liberty, education, investment, and financial maturity are all positively and significantly related to economic growth across countries. Before concluding, the Paper briefly compares and contrasts the experience of the OPEC countries with that of Norway, a singularly successful oil producer.

Suggested Citation

  • Gylfason, Thorvaldur, 2004. "Natural Resources and Economic Growth: From Dependence to Diversification," CEPR Discussion Papers 4804, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4804
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    More about this item

    Keywords

    economic growth; natural resources;

    JEL classification:

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

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