Working Paper: CEPR ID: DP2594
Authors: Thorvaldur Gylfason
Abstract: Economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries. Four main channels of transmission from abundant natural resources to stunted economic development are discussed: (a) the Dutch disease, (b) rent seeking, (c) overconfidence, and (d) neglect of education. Public expenditure on education relative to national income, expected years of schooling for girls, and gross secondary-school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries. Natural capital appears to crowd out human capital, thereby slowing down the pace of economic development.
Keywords: Economic Development; Natural Resources
JEL Codes: O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Natural resource abundance (Q33) | Economic growth (O00) |
| Natural resource abundance (Q33) | Education (I29) |
| Education (I29) | Economic growth (O00) |
| Natural resource abundance (Q33) | Dutch disease (Q33) |
| Natural resource abundance (Q33) | Rent-seeking behaviors (D72) |
| Natural resource abundance (Q33) | Overconfidence in resource wealth (Q33) |
| Natural resource abundance (Q33) | Neglect of education (I24) |