Revisiting the Natural Resource Curse

8/17/2019 Revisiting the Natural Resource Curse

1/18

Revisiting the Natural Resource

Curse(Work in progress)

Presented by Tasneem Raihan


2/18

Introduction

• Eisting empirical literature reports that naturalresource!rich countries tend to have lo"eroutput gro"th rate than resource!poor ones#

•

This empirical observation has given rise to theterms $Natural resource curse%#

• &'ten cited eamples as evidence are Iranene*uela +u"ait ,atar Ira- and .ibya#

•

/o"ever resource!poor countries such as /aiti0rgentina Ethiopia Nepal and 1"it*erlandhave not per'ormed any better#


3/18


4/18


5/18


6/18

Introduction (contd#)

• 0 very common problem "ith the previousstudies is inade-uate sample in'ormationdue to use o' cross!sectional 'rame"ork

• 0 more important problem is theunavailability o' 're-uent data pertainingto natural resource

• In this study these issues are addressedby using panel data on all variablesincluding natural resource


7/18

Introduction (contd#)

• 2sing panel data o' 3!year averages over the period 4567!4555 I empirically sho" that natural resource intensity hasno impact on real 89P gro"th rate#

• This result does not change "ith the introduction o' popular

variables in the gro"th literature e#g# initial real 89P percapita openness o' trade government consumptioninvestment per capita etc#

• Consistent "ith the gro"th literature:s ;ndings abovementioned variables are 'ound to be statistically signi;cant#

•

Natural resource intensity seems to have a statisticallysigni;cant negative impact on 89P gro"th rate only "hencross!sectional data are used# /o"ever the impact appearsto be very close to *ero#


8/18

.iterature Revie"

• 0ccording to 1achs and Warner (455


9/18

.iterature Revie" (contd#)

• Robustness checkA

o Eliminated 44 oil economies and stilloriginal result holds#

o Tried alternative measures o' naturalresource abundance e#g# share o' mineralproduction in 89P in 4564 share o' primaryeports in total eports log o' land area per

person in 4564#o 0ll alternative measures are negatively

associated "ith subse-uent gro"th#


10/18


• 1achs and Warner (7==4) added 'urtherevidence to their previous ;ndings

• Inclusion o' various geography and climate

variables does not eliminate the evidence 'orthe curse o' natural resources

• They also argue that resource!abundantcountries tended to have high price level

"hich stunted eport!led gro"th "hich partlyeplains the negative relationship bet"eennatural resource intensity and 89P gro"th#


11/18


• 8yl'ason and Boega:s (7==4) cross!sectional study o'@< countries sho"ed that natural resource abundancecasts its negative impact on economic gro"th throughthe channel o' saving and investment

• 2sing 12R they estimate that an increase in thenatural capital share by @ or 5 percentage points isassociated "ith a decrease in gro"th by about onepercentage point

• &' the total eect about one!sith can be attributed

to investment and a third to education• Why investment negatively correlated "ith natural

resourceD

• The authors maintained that "hen the share o' outputthat accrues to the o"ners o' natural resources risesdemand 'or capital 'alls resulting in lo"er real interest


12/18


• Why education negatively correlated "ith natural resourceD

! /igh level o' non!"age income such as dividends socialspending and lo" taes due to natural resources reducesprivate and public incentive to accumulate human capital(8yl'ason 7==4)

!Natural resource based primary sector usually hires lo"!skill"orkers and there'ore an epansion in the primary sector"ould render the re-uirement 'or education less necessarythan be'ore (8yl'ason 7==4)

•

&ther channels identi;ed in the literature through "hichnatural resource abundance aects gro"th include The9utch 9isease rent!seeking and social capital (8yl'ason

7==4) corruption .eite and Weidmann (7==7) #


13/18

Contribution to theliterature

• 2se o' a uni-ue data on annual primary eportsshare o' 89P o' 4= countries used by Fearon(7==


14/18

9ata and estimationmethod

• Hodel to be estimatedA

- i denotes country t denotes year and y is 3!year average real 89P percapita calculated 'rom Penn World Table (PWT) 6#4#

- /ere captures the convergence rate o' poor countries to rich countriesin terms o' 89P#

- 1>PA Heasure o' natural resource! 3!year average primary eports shareo' 89P# Taken 'rom Fearon (7==


15/18

Results Table 4#4

(1.1) (1.2) (1.3) (1.4) (1.5)

Log SXP 0.004 0.000 -0.000 -0.001 -0.001

(1.01) (0.06) (0.02) (0.17) (0.15)

Log Initial GDP pc -0.018 -0.023 -0.026 -0.030

(3.15)** (3.62)** (4.06)** (4.57)**

Log p!nn!"" 0.010 0.00# 0.014

(1.82) (1.64) (2.25)*

In$!"t%!nt 0.001 0.001

(4.43)** (3.#3)**

&i$il li'!t in!+ -0.002

(1.53)

&on"tant 0.024 0.166 0.163 0.163 0.1#5

(2.40)* (3.5#)** (3.54)** (3.61)** (4.05)**

R2 0.31 0.32 0.32 0.34 0.33

N 735 735 735 735 721

* p,0.05 ** p,0.01

Dependent variable: 4-year Average Real GDP percapita growth rate


16/18

Results (contd#) Table 4#7

Dependent variable: 4-year Average Real GDP percapita growth rate


17/18

Results (contd#) Table 7A Robustness check


18/18

Conclusion

• In the panel regressions primary eports share o' 89P sho"ed nostatistically signi;cant impact on economic gro"th contrary to the ;ndingso' the eisting literature

• Consistent "ith the eisting literature initial 89P per capita investmenttrade openness and government consumption appeared statisticallysigni;cant#

• I' all other eplanatory variables are held constant then the economytends to approach its long!run position at the rate o' 4#@J!#4J per year#

This is consistent "ith Garro:s (455?) ;nding o' 7#

Date post:	06-Jul-2018
Category:	Documents
Upload:	tasneem-raihan
View:	224 times
Download:	0 times

Revisiting the Natural Resource Curse

Documents