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Abstract
This article is in three parts. First, it briefly describes the contribution of natural resources to economic growth around the world, pondering the question whether an abundance of natural resources is a blessing or a curse. Secondly, an attempt is made to provide a glimpse of recent empirical evidence that can be brought to bear on this question. Thirdly, the article discusses the experience of Norway, the world's third largest oil exporter. To date, Norway has appeared to be mostly free of the worrisome symptoms, such as the Dutch disease, that have afflicted many other countries with abundant natural resources.
Notes
*. Professor of Economics at the University of Iceland, Research Fellow at the Centre for Economic Policy Research (CEPR) in London, and Research Associate at the Center of Economic Studies (CESifo) at the University of Munich. This article is drawn from the author's keynote lecture at a conference on Sustainable resource management, raw materials security, Factor‐X resource productivity – tools for delivering sustainable growth in the European Union organized by the College of Europe and held in Bruges, Belgium, 6–7 December 2006.
1. Quoted from Lee Kuan Yew (1998), ‘The Singapore Story, Memoirs of Lee Kuan Yew’, Singapore Press Holdings, Singapore.
2. See Richard M. Auty (2001), ‘The Political Economy of Resource‐Driven Growth’, European Economic Review 45, May, 839–846, and Michael Ross (2001) ‘Does Oil Hinder Democracy?’, World Politics 53, April, 325–361.
3. See Pranab Bardhan (1997), ‘Corruption and Development: A Review of the Issues’, Journal of Economic Literature 35, September, 1320–1346.
4. See Jeffrey D. Sachs and Andrew M. Warner (1995, revised 1997, 1999), ‘Natural Resource Abundance and Economic Growth’, NBER Working Paper 5398, Cambridge, Massachusetts.
5. See Richard M. Auty (ed.) (2001), ‘Resource Abundance and Economic Development’, Oxford University Press, Oxford and New York.
6. See Daron Acemoglu, Simon Johnson, and James A. Robinson (2003), ‘An African Success Story: Botswana’, Chapter 4 in Dani Rodrik, In Search of Prosperity: Analytical Narratives of Economic Growth, Princeton University Press, Princeton, New Jersey.
7. See Thorvaldur Gylfason (2001), ‘Natural Resources, Education, and Economic Development’, European Economic Review 45, May, 847–859.
8. See Thorvaldur Gylfason and Gylfi Zoega (2006), ‘Natural Resources and Economic Growth: The Role of Investment’, World Economy 29, August, 1091–1115.
9. Nordhaus, William D. (1992), ‘Lethal Model 2: The Limits to Growth Revisited’, Brookings Papers on Economic Activity 2, 1–43.
10. See World Bank (2000), World Development Indicators 2000, World Bank, Washington, D.C. See also World Bank (1997), ‘Expanding the Measure of Wealth: Indicators of Environmentally Sustainable Development’, Environmentally Sustainable Development Studies and Monographs Series No. 17, World Bank, Washington, D.C.
11. Data on natural capital in 2000 have recently become available. See World Bank (2006), ‘Where Is the Wealth of Nations? Measuring Capital for the 21st Centur’, World Bank, Washington, D.C.
12. For a list of the countries and a description of the data, see reference in footnote 8.
13. This discussion draws on Thorvaldur Gylfason (2002), ‘Mother Earth: Ally or Adversary?’, World Economics 3, January–March, 7–24.
14. See the second reference in footnote 10.
15. This was done by first regressing per capita growth on the logarithm of initial income per head (i.e. in 1965) as well as on the share of natural capital in national wealth and then subtracting the initial income component from the observed growth rate.
16. Botswana's natural capital share is small in Figure because the World Bank does not provide an estimate of the country's diamond rent. The inclusion of Botswana in the sample does not materially influence any of the empirical results presented in this paper.
17. The political liberties index is an average for the years 1972–1990 and is taken from Adam Przeworski, Michael E. Alvarez, José Antonio Cheibub, and Fernando Limongi (2000), ‘Democracy and Development: Political Institutions and Well‐Being in the World, 1950–1990’, Cambridge University Press, Cambridge.
18. See reference in footnote 13.
19. See reference in footnote 4.
20. See references in footnotes 7 and 8.
21. See David S. Landes (1998), ‘The Wealth and Poverty of Nations’, W. W. Norton & Co., New York and London, 171.