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Natural Resource Wealth and Directed Technical Change

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  • Paul Segal

Abstract

This paper analyses the e¤ect of a resource discovery on an open economy with endogenous directed technical change. Technical progress depends on entrepreneurs who produce (or adopt) technology, and endogenously choose which sector to operate in. The static e¤ect of a resource discovery is de- industrialization and a rise in non-resource factor incomes, as in standard trade theory. Dynamically, the "brain drain" of entrepreneurs into the re- source sector may exacerbate the de-industrialization over time, but if the discovery is not su¢ ciently large then it leads to temporarily lower growth in non-resource factor incomes, which are lower in the long run than without the discovery. In this case non-resource owners are made worse off by the discov- ery. Second best trade or investment policies that direct entrepreneurs away from the resource sector may be used to raise long-run non-resource income, at a cost to GDP.

Suggested Citation

  • Paul Segal, 2012. "Natural Resource Wealth and Directed Technical Change," OxCarre Working Papers 088, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  • Handle: RePEc:oxf:oxcrwp:088
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    References listed on IDEAS

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    6. Benedikt Goderis & Samuel W. Malone, 2011. "Natural Resource Booms and Inequality: Theory and Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 388-417, June.
    7. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
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    More about this item

    Keywords

    economic growth; Dutch disease; natural resource wealth; directed technical change; distribution of income;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • 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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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