Natural Resource Abundance and Economic Growth

If the nonresource tradable sector has increasing returns, either static or from dynamic learning-by-doing, then resource-driven structural change may reduce the level and growth of real income.

“In particular, if the nonresource tradable sector has increasing returns (either static, or as a result of dynamic learning-by-doing), then the effect may be to reduce the level and growth of real income (Torvik 2001;Krugman 1987;Sachs and Warner 1995).”

This literature has suggested that the history of natural resources can be used to trace the evolution of modern political systems and that the negative impacts of excess resource income include a democracy deficit, declines in real economic growth, and kleptocracies whose sole objective is to enrich themselves while preserving power through gross spending on military repression.

“This literature has also suggested that the history of natural resources can be used to trace the evolution of modern political systems and that the negative impacts of ' excess ' resource income include a ' democracy deficit, ' (Ross 1999), declines in real economic growth (Sachs and Warner 1995), and kleptocracies whose sole objective is to enrich themselves while preserving power through gross”