TAILIEUCHUNG - NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH

Evidence from many countries on the earnings, unemployment, and occupations of blacks, women, religious groups, immigrants, and others has expanded enormously during the past twenty-five years. This evidence more fully documents the economic position of minorities and how that changes in different environments. However, the evidence has not dispelled some of the controversies over the source of lower incomes of minorities (see Cain’s [1986] good review of both the theoretical literature and empirical analysis.). | NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH Jeffrey D. Sachs and Andrew M. Warner Center for International Development and Harvard Institute for International Development Harvard University Cambridge MA November 1997 JEL Classification O4 Q0 F43 NATURAL RESOURCE ABUNDANCE AND ECONOMIC GROWTH ABSTRACT One of the surprising features of modern economic growth is that economies abundant in natural resources have tended to grow slower than economies without substantial natural resources. In this paper we show that economies with a high ratio of natural resource exports to GDP in 1970 the base year tended to grow slowly during the subsequent 20-year period 1970-1990. This negative relationship holds true even after controlling for many variables found to be important for economic growth by previous authors. We discuss several theories and present additional evidence to understand the source of this negative association. I. INTRODUCTION One of the surprising features of economic life is that resource-poor economies often vastly outperform resource-rich economies in economic growth. The basic pattern is evident in a sample of 95 developing countries in Figure 1 where we graph each country s annual growth rate between 1970-90 in relation to the country s natural resource-based exports in 1970 measured as a percent of GDP. Resource-based exports are defined as agriculture minerals and fuels. On average countries which started the period with a high value of resource-based exports to GDP tended to experience slower growth during the following twenty years. Later in the paper we will show that this basic negative relationship is present after controlling for a number of other variables introduced in previous growth studies. It is also present even though for lack of complete data we have excluded eight slow-growing oil-exporting economies Bahrain Iraq Libya Kuwait Oman Qatar Saudi Arabia and the United Arab Emirates. The oddity of resource-poor economies outperforming .

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