Natural resources and patterns of overtaking

Volker Böhm, Tomoo Kikuchi and George Vachadze

International Journal of Economic Theory, 2014, vol. 10, issue 2, 167-177

Abstract: type="main" xml:lang="en">

This paper shows how intergenerational trading of non-depletable natural resources may affect investment in physical capital, implying distinct patterns of overtaking between countries. Specifically, the results indicate that the elasticity of the marginal utility of natural resources plays a crucial role. When the elasticity is less than unity, a resource-abundant country may be overtaken by a resource-scarce country. In this case, savings are withdrawn from productive investment to acquire natural resources. Conversely, when it is greater than unity, the reverse pattern of overtaking may occur since investment in natural resources and in physical capital go hand in hand.

Date: 2014
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