Frontier Expansion and Economic Development

Posted: 28 Apr 2005

See all articles by Edward B. Barbier

Edward B. Barbier

Colorado State University, Fort Collins - Department of Economics

Abstract

Although finding "new frontiers", or "reserves", of natural resources to exploit has been the basis of much of global economic development for the past five hundred years, frontier-based development does not appear to be producing sustained, high rates of growth in today's poorer economies. Through a two-sector model of frontier expansion and economic growth in a resource-dependent small open economy, this paper demonstrates that such expansion will lead inevitably to a boom and bust pattern of long-run development, even if the economy's terms of trade or commodity prices remain unchanged. Initially, it is always optimal for the economy to choose the maximum rate of frontier expansion, and thus ensure an immediate economic boom. However, an eventual economic decline is unavoidable. This result provides an alternative explanation of recent empirical evidence that resource-abundant developing countries display lower than expected long-run rates of growth.

JEL Classification: O13, O41, Q32, Q33

Suggested Citation

Barbier, Edward B., Frontier Expansion and Economic Development. Contemporary Economic Policy, Vol. 23, No. 2, pp. 286-303, April 2005. Available at SSRN: https://ssrn.com/abstract=707661

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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