The Role of Natural Resources in Economic Development

20 Pages Posted: 21 Sep 2003

See all articles by Edward B. Barbier

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics

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Economists now recognize that, along with physical and human capital, environmental resources should be viewed as important economic assets, which can be called. Three recent debates have emerged over the role of natural capital in economic development. First, as many ecological services are unique, does the environment have an "essential" role in sustaining human welfare, and if so, are special "compensation rules" required to ensure that future welfare is not worsened by natural capital depletion today? Second, the environmental Kuznets curve (EKC) hypothesis has fostered empirical estimations of an "inverted U" shaped relationship between a variety of indicators of environmental pollution or resource depletion and the level of income. Does the existence of such EKC relationships suggest that environmental degradation will eventually decline with growth? Finally, recent economic theories and empirical evidence have questioned whether lower income economies that are endowed with abundant natural resources develop more rapidly than economies that are relatively resource poor. Is it possible that resource abundant economies are not reinvesting the rents generated from natural resource exploitation into productive assets, or that resource booms actually divert economic resources from more productive and innovative sectors?

Suggested Citation

Barbier, Edward B., The Role of Natural Resources in Economic Development. Available at SSRN:

Edward B. Barbier (Contact Author)

Colorado State University, Fort Collins - Department of Economics ( email )

Fort Collins, CO 80523-1771
United States

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