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Natural Resource Abundance and Economic Growth

Sachs, Jeffrey D.; Warner, Andrew M.

One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural-resource-scarce economies. In this paper we show that economies with a high ratio of natural resource exports to GDP in 1971 (the base year) tended to have low growth rates during the subsequent period 1971-89. This negative relationship holds true even after controlling for variables found to be important for economic growth, such as initial per capita income, trade policy, government efficiency, investment rates, and other variables. We explore the possible pathways for this negative relationship by studying the cross-country effects of resource endowments on trade policy, bureaucratic efficiency, and other determinants of growth. We also provide a simple theoretical model of endogenous growth that might help to explain the observed negative relationship.

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More About This Work

Academic Units
Earth Institute
Publisher
National Bureau of Economic Research
Series
NBER Working Paper, 5398
Published Here
October 14, 2009

Notes

Previously HIID Development Discussion Paper No. 517a, October 1995.

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