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Natural Resources, Innovation, and Growth

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  • Elissaios Papyrakis

    (IVM/VU Institute for Environmental Studies, Vrije Universiteit)

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    Abstract

    This paper investigates the connection between resource abundance and innovation, as a transmission mechanism that can elucidate part of the resource curse hypothesis; i.e. the observed negative impact of resource wealth on income growth. We develop a variation of the Ramsey-Cass-Koopmans model with endogenous growth to explain the phenomenon. In this model, consumers trade off leisure versus consumption, and firms trade off innovation efforts versus manufacturing. For this model, we show that an increase in resource income frustrates economic growth in two ways: directly by reducing work effort and indirectly by inducing a smaller proportion of the labor force to engage in innovation.

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    File URL: http://www.feem.it/userfiles/attach/Publication/NDL2004/NDL2004-129.pdf
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    Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.129.

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    Date of creation: Oct 2004
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    Handle: RePEc:fem:femwpa:2004.129
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    Keywords: Natural resources; Growth; Innovation;

    Find related papers by JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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    1. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
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    11. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. "Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
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    13. Auty, Richard M., 1994. "Industrial policy reform in six large newly industrializing countries: The resource curse thesis," World Development, Elsevier, vol. 22(1), pages 11-26, January.
    14. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Fundamental," American Economic Review, American Economic Association, vol. 87(2), pages 184-88, May.
    15. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
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    17. S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
    18. Papyrakis, Elissaios & Gerlagh, Reyer, 2004. "The resource curse hypothesis and its transmission channels," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 181-193, March.
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    Cited by:

    1. Parlee, Brenda L., 2015. "Avoiding the Resource Curse: Indigenous Communities and Canada’s Oil Sands," World Development, Elsevier, vol. 74(C), pages 425-436.

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