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A Development Curse: Formal vs. Informal Activities in Resource-Dependent Economies

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  • Elissaios Papyrakis

Abstract

In most resource-driven developing economies, a mineral-based formal sector and an informal resource sector (such as charcoal production) constitute the main economic activities, from which local dwellers derive their livelihoods. The paper examines the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depend on an exhaustible (e.g. minerals) and a renewable resource stock (e.g. forest) respectively. We examine the implications of declining mineral stocks on public revenues, labour movements between sectors, and economic growth in an attempt to elucidate the poor economic performance of most mineral-dependent countries. Decreasing mineral stocks induce a relocation of labour towards informal production, and deprive local authorities from public revenues collected within the formal economy. This constrains the ability to improve infrastructure and welfare over time and simultaneously imposes pressure on the local environment through deforestation.

Suggested Citation

  • Elissaios Papyrakis, 2007. "A Development Curse: Formal vs. Informal Activities in Resource-Dependent Economies," DEGIT Conference Papers c012_027, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c012_027
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    References listed on IDEAS

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    More about this item

    Keywords

    Mining; Growth; Environment;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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