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The relative richness of the poor? natural resources, human capital, and economic growth

Claudio Bravo-Ortega () and Jose De Gregorio ()

No 3484, Policy Research Working Paper Series from The World Bank

Abstract: Are natural resources a blessing or a curse? The authors present a model in which natural resources have a positive effect on the level of income and a negative effect on its growth rate. The positive and permanent effect on income implies a welfare gain. There is a growth effect stemming from a composition effect. However, the authors show that this effect can be offset by having a large level of human capital. They test their model using panel data for the period 1970-90. They extend the usual specifications for economic growth regressions by incorporating an interaction term between human capital and natural resources, showing that high levels of human capital may outweigh the negative effects of the natural resource abundance on growth. The authors also review the historical experience of Scandinavian countries, which in contrast to Latin America, another region well-endowed with natural resources, shows how it is possible to grow fast based on natural resources.

Keywords: Capital Markets and Capital Flows; Economic Theory&Research; Decentralization; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Economic Growth; Inequality; Governance Indicators (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-edu, nep-env, nep-lam and nep-mac
Date: 2005-01-01
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