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Natural Resources and Economic Growth: A Quantitative Exploration

Francisco Rodríguez; Jeffrey D. Sachs

Title:
Natural Resources and Economic Growth: A Quantitative Exploration
Author(s):
Rodríguez, Francisco
Sachs, Jeffrey D.
Date:
Type:
Articles
Department:
Earth Institute
Permanent URL:
Abstract:
This article suggests an alternative explanation for why resource-rich economies have lower growth rates: because they are likely to be living beyond their means. It is shown that overshooting the steady state's equilibrium consumption and investment can be optimal in a Ramsey growth model with natural resources. Therefore, the economy will converge to its steady state from above, displaying negative growth rates on the transition. A dynamic general equilibrium model is calibrated to the Venezuelan economy and shown to approximate the economy's performance over the oil boom years adequately.
Subject(s):
Economics
Item views:
167
Metadata:
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