Articles

Natural Resources and Economic Growth: A Quantitative Exploration

Rodríguez, Francisco; Sachs, Jeffrey D.

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.

Subjects

Files

More About This Work

Academic Units
Earth Institute
Published Here
October 1, 2009