Examining the "Natural Resource Curse" and the Impact of Various Forms of Capital in Small Tourism and Natural Resource-Dependent Economies

Petar Kurecic and Filip Kokotovic
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Petar Kurecic: Department of Business and Economics, University North, 42000 Varazdin, Croatia
Filip Kokotovic: University College of International Relations and Diplomacy Dag Hammarskjöld, 10000 Zagreb, Croatia

Economies, 2017, vol. 5, issue 1, 1-24

Abstract: The problem of the relevance of human and natural capital, as well as the potential adverse effect of natural capital on economic growth, has gained increased attention in development economics. The aim of this paper is to assess, theoretically and empirically, the relevance of several forms of capital on economic growth in certain small economies that are dependent upon tourism or natural resources. The empirical framework is based on Impulse Response Functions obtained from Vector Autoregressive models in which we focus on the model where economic growth is the dependent variable for ten small economies that are dependent upon either tourism or natural resources. We find that there is evidence of the “natural resource curse”, especially in the economies that have a strong dependence on resources that are easily substitutable and whose prices constantly fluctuate. We further find that in the majority of observed cases, the type of capital these small economies are most dependent on for their economic growth causes negative impulses in the majority of the observed periods. Therefore, the main policy recommendation should be to assure that even these small economies should strive towards further diversification and avoid dependence on only one segment of their economy.

Keywords: natural capital; human capital; economic growth; small economies; Vector Auto regression; natural resource curse (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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