Posted by: Requier Wait | July 9, 2014

On Natural Resources and Growth

A large body of research is focused on the impact of natural resources on economic growth. A big portion of this is focused on the so called “resource curse” in resource dependent economies. However, an important question is often omitted: How would resource rich countries have developed in the absence of having these natural resources?

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In a recent paper, Torben Mideksa attempts to answer this specific and important question. The paper develops a case study for Norway’s economy – In short, the analysis constructs a synthetic but robust model of the Norwegian economy that is without hydrocarbon resources. The model compares the evolution of per capita income of the actual and synthetic economy from 1951 to 2007. The main result: “The results indicate that, on average, about 20% of the increase in GDP per capita since 1974 is due to the petroleum endowment”. The author notes that this is an interesting result but that Norway could be an exceptional case. However, in this context, the author further highlights that natural resource endowments hold great potential for improving economic welfare.

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