Oil Greasing the Wheels: When Do Natural Resources Become a Blessing?
This paper considers theoretically and empirically natural resources' effect on growth using a two sector-model (resource and non-resource). Governments tax the non-resource sector and choose institutional quality, which determines productivity in the non-resource sector and the governments' ability to appropriate resource rents. Resource booms harm institutions. Their effect on growth depends on relative sector sizes: when rents are relatively substantial, governments incur the cost of corrupting institutions and the loss of taxes from the non-resource sector for a bigger share of rents. The results are confirmed using cross-country panel data: countries in the bottom quintile of the manufacturing-share of value-added are cursed by resources, other countries are blessed.
|Date of creation:||Sep 2008|
|Date of revision:||Sep 2008|
|Publication status:||Published by The Economic Research Forum (ERF)|
|Contact details of provider:|| Postal: |
Web page: http://www.erf.org.eg
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