Resource Curse or Debt Overhang?

37 Pages Posted: 20 Jul 2001 Last revised: 10 Jan 2010

See all articles by Osmel E Manzano

Osmel E Manzano

Instituto de Estudios Superiores de Administración (IESA) - Centro Internacional de Energía y Ambiente; Inter-American Development Bank (IDB)

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: July 2001

Abstract

It has been widely believed that resource abundant economies grow less than other economies. In a very influential paper, Sachs and Warner (1997), point out that there is a negative relationship between resource abundance and growth. Two important econometric problems are present in the traditional empirical literature: First, the result might depend on factors that are correlated with primary exports but that have been excluded from the regression. Second, total GDP includes the production in the resource sector that has been declining in the last 30 years. We correct for those issues. Our results indicate that the so called 'Natural Resource Curse' might be related to a debt overhang. In the 70's when commodities' prices were high, natural resource abundant countries used them as collateral for debt. The 80's witnessed an important fall in the prices that drove these countries to debt crises. When we estimate the model taking these into account, we found that the effect of resource abundance disappears.

Suggested Citation

Manzano Mazzali, Osmel E and Rigobon, Roberto, Resource Curse or Debt Overhang? (July 2001). NBER Working Paper No. w8390. Available at SSRN: https://ssrn.com/abstract=277300

Osmel E Manzano Mazzali (Contact Author)

Instituto de Estudios Superiores de Administración (IESA) - Centro Internacional de Energía y Ambiente ( email )

Caracas
Venezuela

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Roberto Rigobon (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-447
Cambridge, MA 02142
United States
617-258-8374 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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