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Natural Resources and Economic Growth: What is the Connection?
Thorvaldur Gylfason University of Iceland - Faculty of Economics and Business Administration; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research) August 2001 CESifo Working Paper No. 530 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.
Keywords: Natural Resources, Economic Growth JEL Classifications: O11 Working Paper SeriesDate posted: August 21, 2001 ; Last revised: September 01, 2004Suggested CitationContact Information
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