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Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites

  • Falkinger, Josef

    ()

    (University of Zurich)

  • Grossmann, Volker

    ()

    (University of Fribourg)

This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1756.

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Length: 58 pages
Date of creation: 2005/09
Publication status: published as 'Oligarchic Land Ownership, Entrepreneurship, and Economic Development' in: Journal of Development Economics, 2013, 101 (1), 206-215.
Handle: RePEc:iza:izadps:dp1756
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