Catch-Up and the Curse of Oil

Thorvaldur Gylfason and Gylfi Zoega

No 12448, CESifo Working Paper Series from CESifo

Abstract: Because of convergence, initial income is an important explanatory variable in many growth regressions. Its omission can lead to misspecification bias that may seem to – but still does not – contradict the common albeit somewhat controversial empirical finding that natural resources, if not well managed, tend to depress incomes and growth. We illustrate the bias using simple algebra and cross-country regression analysis with two different data sets: old and new. We distinguish between natural resource abundance and dependence and propose a method for identifying the level of national income at which the net effects of natural resources shift from adverse to advantageous.

Keywords: economic growth; natural resources; misspecification bias (search for similar items in EconPapers)
JEL-codes: O11 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_12448

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