Revisiting the Natural Resource Curse
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Transcript of Revisiting the Natural Resource Curse
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Revisiting the Natural Resource
Curse(Work in progress)
Presented by Tasneem Raihan
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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#
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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
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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#
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.iterature Revie"
• 0ccording to 1achs and Warner (455
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.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#
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.iterature Revie" (contd#)
• 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#
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.iterature Revie" (contd#)
• 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
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.iterature Revie" (contd#)
• 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)
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&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) #
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Contribution to theliterature
• 2se o' a uni-ue data on annual primary eportsshare o' 89P o' 4= countries used by Fearon(7==
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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==
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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
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Results (contd#) Table 4#7
Dependent variable: 4-year Average Real GDP percapita growth rate
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Results (contd#) Table 7A Robustness check
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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#