Inequality and Economic Growth: Do Natural Resources Matter?

By Thorvaldur Gylfason, Gylfi Zoega. Social Science Research Network, 2002

216 citations recorded by the source corpus.

This paper is intended to demonstrate, in theory as well as empirically, how increased dependence on natural resources tends to go along with less rapid economic growth and greater inequality in the distribution of income across countries. On the other hand, public policy in support of education can simultaneously enhance equality and growth by raising the return to working in higher technology (that is, nonprimary) industries and thus counter some of the potentially adverse effects of excessive natural resource dependence. Together, these two variables – natural resources and education – can help account for the inverse relationship between inequality and growth observed in cross-country data. Moreover, the analysis highlights the role of public revenue policy. Taxes and fees can be used to reduce the attractiveness of primary-sector employment, lift the marginal productivity of capital in higher technology industries and thus increase the rate of interest and economic growth, while reducing the inequality of income and wealth.

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Citations in the corpus

• Education, Social Equality and Economic Growth: A View of the Landscape (2003, unknown): “On the other hand, we have elsewhere reported evidence of interaction between inequality and natural capital in our growth equation suggesting that natural resources matter for growth through the distribution of income, among other channels (Gylfason and Zoega 2003a).”
• The Varieties of Resource Experience : Natural Resource Export Structures and the Political Economy of Economic Growth (2005, unknown): “…(1999); Leite and Weidmann (1999); Ross (1999, 2001); Sachs and Warner (1995, 1999); Stijns (2001); Nugent and Robinson (2001); Gylfason (2001); Gylfason and Zoega (2001, 2002); Lederman and Maloney (2002); Easterly and Levine (2002); Murshed (2003); Sala-i-Martin and Subramanian (2003);…”
• Natural Resources and Economic Growth: The Role of Investment (2006, unknown): “In a recent paper (Gylfason and Zoega, 2003) we develop a model of rent-seeking behaviour that also produces an adverse effect of natural resources on growth.”