Can the Natural Resource Curse Be Turned into a Blessing? The Role of Trade Policies and Institutions

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dc.contributor.author AREZKI, Rabah
dc.contributor.author VAN DER PLOEG, Frederick
dc.date.accessioned 2007-10-27T08:00:51Z
dc.date.available 2007-10-27T08:00:51Z
dc.date.issued 2007
dc.identifier.issn 1725-6704
dc.identifier.uri http://hdl.handle.net/1814/7336
dc.description.abstract We criticise existing empirical results on the detrimental effects of natural resource dependence on the rate of economic growth after controlling for institutional quality, openness and initial income. These results do not survive once we use instrumental variables to correct for the endogenous nature of the explanatory variables. Furthermore, they suffer from omitted variables bias as they over-estimate the effect of initial income per capita and thus under-estimate the speed of conditional convergence. Instead, we provide new evidence for the impact of natural resource dependence on income per capita in a systematic empirical cross-country framework. In addition to a significant negative direct impact of natural resources on income per capita, we find significant indirect effect of natural resources on institutions. We allow for interaction effects and provide evidence that the natural resource curse is particularly severe for economic performance in countries with a low degree of trade openness. Adopting policies directed toward more trade openness may thus soften the impact of a resource curse. We also check the robustness of our results by using a variety of instruments and also employing the ratio of natural capital rather than natural resource exports to national income as an explanatory variable. We find evidence that resource abundance, measured by the stock of natural capital, also induces a resource curse, but less severely for countries that are relatively open. en
dc.language.iso en en
dc.publisher European University Institute
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2007/35 en
dc.subject resource curse en
dc.subject resource dependence en
dc.subject resource abundance en
dc.subject institutional quality en
dc.subject natural capital en
dc.subject openness en
dc.subject geography en
dc.subject interaction effects en
dc.subject instruments en
dc.subject growth performance en
dc.subject trade policies en
dc.subject income per capita en
dc.subject cross-country evidence en
dc.subject C21 en
dc.subject C82 en
dc.subject O11 en
dc.subject O41 en
dc.subject Q30 en
dc.title Can the Natural Resource Curse Be Turned into a Blessing? The Role of Trade Policies and Institutions en
dc.type Working Paper en
dc.neeo.contributor AREZKI|Rabah|aut|
dc.neeo.contributor VAN DER PLOEG|Frederick|aut|
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