Natural Resources and Economic Growth: A Quantitative Exploration
Francisco Rodríguez; Jeffrey D. Sachs
- Natural Resources and Economic Growth: A Quantitative Exploration
Sachs, Jeffrey D.
- Earth Institute
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- 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.
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