A Development Curse: Formal vs. Informal Activities in Resource-Dependent Economies

Elissaios Papyrakis

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: In most resource-driven developing economies, a mineral-based formal sector and an informal resource sector (such as charcoal production) constitute the main economic activities, from which local dwellers derive their livelihoods. The paper examines the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depend on an exhaustible (e.g. minerals) and a renewable resource stock (e.g. forest) respectively. We examine the implications of declining mineral stocks on public revenues, labour movements between sectors, and economic growth in an attempt to elucidate the poor economic performance of most mineral-dependent countries. Decreasing mineral stocks induce a relocation of labour towards informal production, and deprive local authorities from public revenues collected within the formal economy. This constrains the ability to improve infrastructure and welfare over time and simultaneously imposes pressure on the local environment through deforestation.

Keywords: Mining; Growth; Environment (search for similar items in EconPapers)
JEL-codes: O11 O13 Q32 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2007-06
New Economics Papers: this item is included in nep-afr, nep-dev and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:deg:conpap:c012_027

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