Working Paper: CEPR ID: DP4804
Authors: Thorvaldur Gylfason
Abstract: This Paper reviews the relationship between natural resource dependence and economic growth, and stresses how natural capital intensity tends to crowd out foreign capital, social capital, human capital, physical capital, and financial capital, thereby impeding economic growth across countries. Specifically, the Paper presents empirical cross-country evidence to the effect that nations that depend heavily on their natural resources tend to have (a) less trade and foreign investment, (b) more corruption, (c) less equality, (d) less political liberty, (e) less education, (f) less domestic investment, and (g) less financial depth than other nations that are less well endowed with, or less dependent on, natural resources. This matters for long-run growth because empirical evidence also suggests that trade, honesty, equality, liberty, education, investment, and financial maturity are all positively and significantly related to economic growth across countries. Before concluding, the Paper briefly compares and contrasts the experience of the OPEC countries with that of Norway, a singularly successful oil producer.
Keywords: economic growth; 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 dependence (Q37) | Reduced trade (F19) |
| Natural resource dependence (Q37) | Reduced foreign investment (F21) |
| Natural resource dependence (Q37) | Higher levels of corruption (D73) |
| Natural resource dependence (Q37) | Increased income inequality (D31) |
| Natural resource dependence (Q37) | Lower political liberties (D72) |
| Natural resource dependence (Q37) | Hindered education and human capital development (I25) |
| Natural resource dependence (Q37) | Lower savings and investment rates (E21) |
| Lower savings and investment rates (E21) | Impeded economic growth (F69) |