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Abstract:
This paper reviews the relationship between natural resources and economic growth, and stresses how natural capital tends to crowd out foreign capital, social capital, human capital, and physical capital, thereby impeding economic growth across countries and presumably also over time. Specifically, the paper presents empirical evidence that nations with abundant natural capital tend to have (a) less trade and foreign investment, (b) more corruption, (c) less education, and (d) less domestic investment than other nations that are less well endowed with, or less dependent on, natural resources. This matters for growth because empirical evidence also indicates that trade, honesty, education, and investment are all positively and significantly related to economic growth across countries.

Natural Resources, Economic Growth

Abstract:
This paper is intended to demonstrate, in theory as well as empirically, how increased dependence on natural resources tends to go along with less rapid economic growth and greater inequality in the distribution of income across countries. On the other hand, public policy in support of education can simultaneously enhance equality and growth by raising the return to working in higher technology (that is, nonprimary) industries and thus counter some of the potentially adverse effects of excessive natural resource dependence. Together, these two variables "natural resources and education" can help account for the inverse relationship between inequality and growth observed in cross-country data. Moreover, the analysis highlights the role of public revenue policy. Taxes and fees can be used to reduce the attractiveness of primary-sector employment, lift the marginal productivity of capital in higher technology industries and thus increase the rate of interest and economic growth, while reducing the inequality of income and wealth.

Abstract:
Education has been one of the key determinants of economic growth around the world since 1965. In this paper, we discuss three different measures of education, and consider their relationship to the distribution of income as measured by the Gini coefficient as well as to economic growth across countries. The three measures are: (a) gross secondary-school enrollment, (b) public expenditure on education relative to national income and (c) expected years of schooling for girls. We show that all three measures of education are directly related to income equality across countries. In a sample of 87 countries at all income levels, we also find that more and better education appears to encourage economic growth directly as well as indirectly through increased social equality and cohesion. Our regression results survive the introduction of regional dummy variables for Africa, Asia and Central and South America. We argue that the empirical relationship between education, on the one hand, and growth and equality, on the other hand, can help account for the positive correlation between the two latter variables that has been documented in the literature.

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. Second, an attempt is made to provide a glimpse of recent empirical evidence that can be brought to bear on this question. Third, 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.

Abstract:
This essay reviews the relationship between natural-resource abundance and economic growth around the world, and presents some new results. The principal reasons why resource-based production can inhibit economic growth over long periods are traced to the Dutch disease, neglect of education, rent seeking, and economic policy failures. Across a large number of countries in the period from 1965 to 1998, the share of the primary sector in the labour force is shown to be inversely related to exports, domestic and foreign investment, and education, and directly related to external debt, import protection, corruption, and income inequality. The cross-sectional data show, moreover, that the share of the primary sector in the labour force is inversely related to per capita growth across countries. None of this lies in the nature of things, however. What seems to matter for economic growth is not the abundance of natural resources per se, but rather the quality of their management, and of economic management and institutions in general.

Abstract:
This paper reviews some reasons why natural resource abundance and extensive agriculture appear to impede economic growth around the world. The paper presents empirical, cross-sectional evidence of various aspects of this relationship in the transition economies in Central and Eastern Europe and Central Asia since 1990. The essence of the argument is that heavy dependence on natural resources and agriculture may result in rent seeking (e.g., corruption) and policy failures (e.g., inflation) and may, moreover, discourage education, external trade, and genuine saving, thereby retarding economic growth. The paper concludes with a brief discussion of the policy implications of the analysis.

Abstract:
This paper reviews some reasons why natural resource abundance and extensive agriculture appear to impede economic growth around the world. The paper presents empirical, cross-sectional evidence of various aspects of this relationship in the transition economies in Central and Eastern Europe and Central Asia since 1990. The essence of the argument is that heavy dependence on natural resources and agriculture may result in rent seeking (e.g., corruption) and policy failures (e.g., inflation) and may, moreover, discourage education, external trade, and genuine saving, thereby retarding economic growth. The paper concludes with a brief discussion of the policy implications of the analysis.

Abstract:
Macroeconomic Dynamics commissioned this interview with Assar Lindbeck for a series of such conversations with economists, starting with Duncan Foley's interview with Wassily Leontief in 1998. Other interviews in the series include Ben McCallum's interview with Robert Lucas (1999), Olivier Blanchard's interview with Janos Kornai (1999), Daniel Trefler's interview with Elhanan Helpman (1999), William Barnett and Robert Solow's interview with Franco Modigliani (2000), John Taylor's interview with Milton Friedman (2001), James Poterba's interview with Martin Feldstein (2003), Brian Snowdon's interview with Axel Leijonhufvud (2003), William Barnett's interview with Paul Samuelson (2003), and John Campbell's interview with Robert Shiller (2004). Forthcoming interviews include Olivier Blanchard's interview with Stanley Fischer (2005), Omar Licandro and Pierre Dehez's interview with Jacques Dreze (2005), and George Evans and Seppo Honkapohja's interview with Tom Sargent (2005).

Abstract:
This lecture addresses three related aspects of monetary and fiscal management in Europe and elsewhere. First, I discuss the implications of economic integration for monetary and fiscal policy, especially the narrow focus on low inflation as the main objective of monetary policy. I argue that because inflation springs from several sources, monetary authorities held responsible by law for maintaining low inflation need to exercise their newfound independence by reserving the right to address all sources of inflation. In this context, I also ponder the question whether increased independence of fiscal policy from short-term political interference would be desirable. Second, I present new empirical evidence of the relationship between inflation, finance, and economic growth across countries, arguing that long-run growth considerations provide an important additional justification for why price stability ought to remain a priority of independent policy makers. Third, I review some further aspects of the relationship between fiscal policy and economic growth, emphasizing the traditional three-pronged role of fiscal management: stabilization, allocation, and distribution, all of which can be conducive to growth. The argument leads to the conclusion that only the stabilization function of fiscal policy and perhaps also some aspects of the allocation function could be usefully delegated in an attempt to immunize them from shortsighted and socially counter-productive political interference, but not the distribution function.

Abstract:
This paper identifies some of the main determinants of exports and economic growth in cross-sectional data from the World Bank, covering 160 countries in the period 1985-1994. First, the linkages between the propensity to export and population, per capita income, agriculture, primary exports, and inflation are studied by statistical methods. Then, the relationship between economic growth and some of the above-mentioned determinants of exports and investment are scrutinized the same way. The main conclusion is that, in the period under review, high inflation and an abundance of natural resources tended to be associated with low exports and slow growth.

Trade, Natural Resources, Inflation, Economic Growth

Abstract:
We compare and contrast the economic growth performance of Estonia and Georgia since the collapse of the Soviet Union in 1991 in an attempt to understand better the extent to which the growth differential between the two countries can be traced to increased efficiency in the use of capital and other resources (intensive growth) as opposed to brute accumulation of capital (extensive growth). We infer that advances in education at all levels, good governance, and institutional reforms have played a more significant role in raising economic output and efficiency in Estonia than in Georgia, which remains marred by various problems related to weak governance in the public and private spheres.

economic growth, governance, transition economies

Abstract:
This paper introduces state-owned enterprises into an endogenous-growth model with an expanding variety of inputs. It shows that, if state firms are less efficient than private firms in organizing labor and also in adopting new technology, the rate of innovation and, hence, also the rate of growth of output will be lower in the long run, ceteris paribus, because the rate of innovation is adversely affected. The model is tested on cross-section data for about 75 industrial and developing countries over the period 1978-92. We find that the size of state-owned sector is inversely related to total factor productivity and economic growth.

Abstract:
Is it possible that excessive reliance on natural resources affects saving and investment in a way that retards economic growth? - and thus, in the long run, the level of output per capita. This paper reviews the literature, explores the data and compares and contrasts the explanatory power and interplay of natural resources and civil liberties, our proxy for institutional variables currently under scrutiny in the literature. We propose that natural resource dependence may be viewed as an exogenous factor that impedes economic growth and investment as well as institutions, even if we stress that natural resource abundance may be good for growth.

Abstract:
Empirical evidence seems to indicate that economic growth since 1965 has varied inversely with natural resource abundance across countries. This paper proposes a linkage between abundant natural resources and economic growth, through saving and investment. When the share of output that accrues to the owners of natural resources rises, the demand for capital falls leading to lower real interest rates and less rapid growth. However, institutional reforms paving the way to a more efficient allocation of capital may enhance the quantity as well as the quality of new investment and sustain growth. Empirical evidence from 85 countries from 1965 to 1998 suggests that abundant natural capital may on average crowd out physical capital thereby inhibiting economic growth. The results also suggest that abundant natural resources may hurt saving and investment indirectly by slowing down the development of the financial system. However, high growth rates in a handful of formerly resource-dependent economies seem to indicate that economic and structural reforms can overcome any adverse effect of natural resources on economic growth.

Economic growth, investment, natural resources

Abstract:
This Paper reviews the relationship between natural resource dependence and economic growth, and stresses how natural capital intensity tends to crowd out foreign capital, social capital, human capital, physical capital, and financial capital, thereby impeding economic growth across countries. Specifically, the Paper presents empirical cross-country evidence to the effect that nations that depend heavily on their natural resources tend to have (a) less trade and foreign investment, (b) more corruption, (c) less equality, (d) less political liberty, (e) less education, (f) less domestic investment, and (g) less financial depth than other nations that are less well endowed with, or less dependent on, natural resources. This matters for long-run growth because empirical evidence also suggests that trade, honesty, equality, liberty, education, investment, and financial maturity are all positively and significantly related to economic growth across countries. Before concluding, the Paper briefly compares and contrasts the experience of the OPEC countries with that of Norway, a singularly successful oil producer.

Economic growth, natural resources

Abstract:
This paper makes two main points. First, irrespective of nominal exchange rate arrangements, the real exchange rate always floats - if not through nominal exchange rate adjustment, then through price change. Further, because prices and wages tend to be sticky, the adjustment of real exchange rates towards long-run equilibrium takes time, as witnessed by long-lasting currency misalignments around the world. In second place, real exchange rates are rather likely to fluctuate on their way towards long-run equilibrium because of the dynamic interaction between real exchange rates and the current account or, put differently, because the structure of lags with which exchange rates impact the volume of exports and imports may give rise to oscillatory behaviour.

Abstract:
This Paper makes two main points. First, irrespective of nominal exchange rate arrangements, the real exchange rate always floats - if not through nominal exchange rate adjustment, then through price change. Further, because prices and wages tend to be sticky, the adjustment of real exchange rates towards long-run equilibrium takes time, as witnessed by long-lasting currency misalignments around the world. Second, real exchange rates are likely to fluctuate on their way towards long-run equilibrium because of the dynamic interaction between real exchange rates and the current account; or, put differently, because the structure of lags with which exchange rates impact the volume of exports and imports may give rise to oscillatory behaviour.

Flexible exchange rates

Abstract:
We compare and contrast the economic growth performance of Estonia and Georgia since the collapse of the Soviet Union in 1991 in an attempt to understand better the extent to which the growth differential between the two countries can be traced to increased efficiency in the use of capital and other resources (intensive growth) as opposed to brute accumulation of capital (extensive growth). On the basis of a simple growth accounting exercise, we infer that advances in education at all levels, good governance, and institutional reforms have played a more significant role in raising economic output and efficiency in Estonia than in Georgia which remains marred by various problems related to weak governance in the public and private spheres.

Economic growth, Estonia, Georgia, Governance, Transition economies, Education, Economic reforms, Exports, Inflation, Labor markets

Abstract:
We discuss the quota system by which Iceland's fisheries have been managed since 1984, and explore its implications for economic efficiency as well as fairness. We argue that the shortcomings of the Icelandic quota system are inherent in any type of quota system applied to high-seas fishing. Further, we find that regulating access to a limited, stochastic common-property natural resource such as Iceland's fish by fee rather than by quota - i.e., by relying on price incentives rather than quantitative restrictions - would constitute a more equitable and more efficient solution to the fisheries management problem. Our argument applies to the management of all open-seas fisheries, including the Common Fisheries Policy of the European Union.

Fisheries management

Abstract:
Does it always pay to install high-quality capital? Or could it possibly be more profitable to make investments that do not last too long? In this Paper we ponder the optimal rate of depreciation of physical capital, first in the Solow model and then in a model of endogenous growth with learning-by-doing. Optimal durability and depreciation, including obsolescence, are attained when the marginal benefit of increasing durability - and thus reducing the need for future replacement investment - is equal to the marginal cost, which is the additional cost of investing due to the higher quality of capital. The optimality conditions are set out as golden rules for the quality, or durability, of capital. They entail that the higher the rate of population growth or technological progress, the larger the marginal cost of investing in durability and the lower the optimal level of durability; hence, the higher the optimal rate of depreciation. We then use a customer-market model to derive the privately optimal level of durability, and find that there is nothing in the model that ensures the socially optimal level of durability and depreciation.

Capital, depreciation, economic growth, obsolescence

Abstract:
This paper is intended to clarify the contribution of macroeconomic stabilization and structural adjustment to the transformation from plan to market in Central and Eastern Europe and elsewhere. Four main points emerge. First, increased price stability improves the utilization of capital and thus increases the level of output at full employment in the long run, even though output decreases initially. Second, the static output gain from stabilization is captured in a simple formula in which the gain is approximately proportional to the square of the original inflation distortion. Third, successful stabilization increases the rate of growth of output per head, and not only its level, in the presence of constant returns to capital in a broad sense. Fourth, substitution of plausible parameter estimates into the simple formulae reflecting the gains from stabilization indicate that the static and dynamic output gains can be quite large.

Abstract:
No abstract is available for this paper.

Abstract:
This paper describes some of the ways in which mineral rents and their management influence economic growth and other determinants of growth as well as some of the reasons why many mineral-rich countries have not managed very well to divert their resource rents to furthering economic and social development - that is, why natural capital tends to crowd out human, social, financial and real capital. The empirical evidence of these linkages is presented in two rounds. First, we allow World Bank data covering 164 countries in 1960-2000 to speak for themselves through a sequence of bilateral correlations that suggest an inverse relationship between natural resource dependence and growth via human capital. We then repeat the exercise for two aspects of social capital, corruption and democracy, suggesting an additional adverse effect of natural resource dependence via social capital on growth. In the second round, we test for the robustness of natural resource dependence as a determinant of long-run growth by estimating a series of growth regressions for the same 164 countries.

Economic growth, natural resources, social policy

Abstract:
Privatization is shown to increase national economic output in a two-sector full-employment general-equilibrium model by enhancing efficiency as if a relative price distortion were being removed through price reform, trade liberalization, or stabilization. The static output gain from reallocation and reorganization through privatization is captured in a simple formula in which the gain is a quadratic function of the original distortion stemming from an excessive public sector. Substitution of plausible parameter values into the formula indicates that, in practice, the static output gain from privatization may be large. The potential dynamic output gain from privatization also appears to be substantial.

Abstract:
This paper diagnoses the symptoms of the Dutch disease in a two-sector stochastic endogenous growth model. A productive, low skill-intensive primary sector causes the currency to appreciate in real terms, thus hampering the development of a high skill-intensive secondary sector and thereby reducing growth.

Abstract:
Some channels through which increased inflation tends to reduce economic growth, and vice versa, are studied within a simple model incorporating money into an optimal growth framework with constant returns to capital. The model includes the potential impact of inflation on (a) saving through real interest rates (or uncertainty), (b) the income velocity of money, (c) the government budget deficit through the inflation tax and tax erosion, and (d) efficiency in production through the wedge between the returns to real and financial capital.The effect of inflation on growth is estimated using the random-effects panel model applied to two sets of unbalanced panel data side by side, from the Penn World Tables and from the World Bank, covering 170 countries from 1960 to 1993. The cross-country links between inflation and growth are economically and statistically significant and robust.