Natural Resource Booms and Inequality: Theory and Evidence

30 Pages Posted: 24 May 2011

See all articles by Benedikt Goderis

Benedikt Goderis

The Netherlands Institute for Social Research|SCP

Samuel W. Malone

University of the Andes

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Date Written: June 2011

Abstract

We develop a theory, in the context of a two‐sector growth model in which learning‐by‐doing drives growth, to explain the time path of income inequality following natural resource booms in resource‐rich countries. Under the condition of a relatively unskilled labor intensive non‐traded sector, inequality falls immediately after a boom, and then increases steadily over time until the initial impact of the boom disappears. Using data for 90 countries between 1965 and 1999, we find evidence in support of the theory, especially for oil and mineral booms. We also find that uncertainty about future commodity prices increases long‐run inequality.

Keywords: Dutch disease, windfalls, commodity prices, O13, O15, F11, Q33

Suggested Citation

Goderis, Benedikt and Malone, Samuel W., Natural Resource Booms and Inequality: Theory and Evidence (June 2011). Scandinavian Journal of Economics, Vol. 113, Issue 2, pp. 388-417, 2011, Available at SSRN: https://ssrn.com/abstract=1851192 or http://dx.doi.org/10.1111/j.1467-9442.2011.01659.x

Benedikt Goderis (Contact Author)

The Netherlands Institute for Social Research|SCP ( email )

Rijnstraat 50
The Hague, 2515
Netherlands

Samuel W. Malone

University of the Andes ( email )

Carrera Primera # 18A-12
DC D.C. 110311
Colombia

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