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Neoclassical Growth and the Natural Resource Curse Puzzle

  • Guilló, María Dolores

    ()

    (Departamento de Métodos Cuantitativos y Teoría Económica y IUDESP)

  • Pérez-Sebastián, Fidel

    ()

    (Departamento de Fundamentos del Análisis Económico)

The traditional view that natural riches increase the wealth of nations has been recently challenged by empirical findings that point out that natural inputs are negatively related to growth. This paper shows, within a two-sector neo-classical growth model with international trade in goods, that these two views can be reconciled. Natural inputs directly affect both long-run income and transitional growth. These two effects can be positive or negative depending on input elasticities. Furthermore, they go in opposite directions, creating a tension that complicates the interpretation of estimated-coefficient signs in growth regressions. Quantitative results show that the two effects can be significant.

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Paper provided by Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica in its series QM&ET Working Papers with number 12-14.

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Length: 44 pages
Date of creation: 26 Jul 2012
Date of revision:
Handle: RePEc:ris:qmetal:2012_014
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