Download Natural capital and growth

Natural Resources
and Economic
Growth:
From Dependence
to Diversification
Thorvaldur Gylfason
Outline of presentation
1. The macroeconomics of oil
2. Empirical cross-country evidence
on natural resources and economic
growth
3. But, Norway is different
Macroeconomics of oil
and other resources
Natural
resources
x
Economic
growth
Macroeconomics of oil
and other resources
Natural
resources
x
Economic
growth
Five main channels of
transmission
1. The Dutch disease
Exchange rates, wages, volatility
Hurts level or composition of exports and FDI
2. Rent seeking
Protectionism, cronyism, corruption, …
3. False sense of security
Poor quality of policies and institutions
4. Neglect of education
5. Neglect of investment
Crowding out
Hence, natural capital may crowd out
Foreign capital
Social capital
Human capital
Real capital
Financial capital
These mechanisms can be viewed as
additional symptoms of the Dutch
disease or as separate channels of
transmission
Natural resource abundance
and economic structure
Resource dependence
Dependence hurts growth, even if abundance may help
Resource poor,
resource dependent
(Chad, Mali)
Resource rich,
resource dependent
(OPEC)
Resource poor,
resource free
(Jordan, Panama)
Resource rich,
resource free
(Canada, USA)
Resource abundance
Natural capital and
growth: The evidence
Review a few of the empirical findings
of the new literature on natural
resources and economic growth
Present cross-country evidence
Individual historical case studies support
the results
Stress linkages among natural capital
and other kinds of capital as well as
growth in 86 countries, rich and poor
Different Kinds of Capital and Growth
Foreign capital
3
Financial capital
+
4
+
Growth
+
Real capital
1
+
+
5
2
Social capital
Human capital
Different Kinds of Capital and Growth
Foreign capital
11
–
3
Financial capital
+
4
+
– 10
Growth
+
1
Real capital
–
–
6
+
+
5
2
Social capital
Human capital
9
8
Natural capital
–
–
7
45
r = -0.38
Lesotho
Investment 1965-98 (% of GDP)
40
35
Japan
30
Guinea Bissau
25
20
15
Niger
10
Chad
5
0
0
20
40
Share of natural capital in national w ealth
1994 (%)
60
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = 0.65
Botswana
4
China
2
1%
0
0
5
10
15
-2
20
25
30
4%
35
Jordan
-4
-6
Niger
Nicaragua
-8
Investm ent 1965-98 (% of GDP)
Interpretation of results
Growth
Investment
=
+
Resources
Growth
Investment
Resources
Secondary-school enrolment 1980-97 (%)
120
r = -0.63
Finland
100
New Zealand
80
Uruguay
60
Ecuador
40
Saudi Arabia
20
0
0
20
40
-20
-40
Share of natural capital in national w ealth
1994 (%)
60
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = 0.72
4
Thailand
2
Finland
0
0
20
40
60
80
100
120
New Zealand
-2
Jamaica
-4
Ghana
-6
-8
Secondary enrolm ent 1980-97 (% of cohort)
Interpretation of results
Growth
Education
=
+
Resources
Growth
Education
Resources
Interpretation of results
Natural-resource-based industries are
generally less high-skill labor
intensive and less high-quality
capital intensive than others, and so
confer few external benefits
distort comparative advantage
impede learning by doing, technical
advance, and economic growth
Money and quasi-money 1965-98 (% of GDP)
120
r = -0.68
Switzerland
100
Japan
80
China
60
New Zealand
40
India
20
0
0
10
20
30
40
50
Share of natural capital in national w ealth
1994 (%)
60
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = 0.66
4
2
Japan
Indonesia
Switzerland
0
0
20
40
60
80
100
120
-2
Jamaica
Jordan
-4
-6
-8
Money and quasi-m oney 1965-98 (% of GDP)
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = 0.66
4
2
Japan
Indonesia
Switzerland
0
0
20
40
60
80
100
120
-2
Jamaica
Jordan
-4
-6
-8
Money and quasi-m oney 1965-98 (% of GDP)
Interpretation of results
Financial depth
+
Resources
Growth
Growth
=
Financial depth
Resources
Money and quasi-money 1965-98 (% of GDP)
120
r = -0.45
Switzerland
100
80
Japan
Austria
60
40
Nicaragua
Argentina
20
0
0,00
Brazil
0,20
0,40
0,60
0,80
Inflation distortion 1965-98
1,00
Interpretation of results
Financial depth
+
Inflation
Growth
Growth
=
Financial depth
Inflation
Actual less predicted FDI 1965-98 (% of GDP)
10
r = -0.24
Botswana
8
6
UK
4
New Zealand
2
Sierra Leone
0
0
20
40
-2
Guinea Bissau
-4
Share of natural capital in national w ealth
1994 (%)
60
Annual groth of per capita GNP 1965-1998,
adjusted for initial income (%)
6
r = 0.44
Korea
Botswana
4
China
2
0
-5
0
-2
5
10
Panama
-4
-6
Nicaragua
-8
Actual less predicted FDI 1965-98 (% of GDP)
Interpretation of results
Growth
FDI
=
+
Resources
Growth
FDI
Resources
70
Brazil Paraguay
Gini index of inequality
60
50
7 African countries
where saving is 5% of GDP
and per capita growth
is -1% per year
40
India
30
Rwanda
Austria
20
10
r = 0.41
0
0
10
20
30
40
50
Share of natural capital in national w ealth
1994 (%)
60
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = -0.50
4
Korea
2
China
Norway
Brazil
0
0
10
20
30
40
50
60
70
South Africa
-2
-4
Sierra Leone
-6
Gini index of inequality
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = -0.50
4
Korea
2
China
Norway
Brazil
0
0
10
20
30
40
50
60
70
South Africa
-2
-4
Sierra Leone
-6
Gini index of inequality
Interpretation of results
Growth
Inequality
=
+
Resources
Growth
Inequality
Resources
12
r = -0.42
Finland
Corruption index 2000
10
New Zealand
8
Chile
6
4
Zambia
2
Cameroon
Indonesia
0
0
10
20
30
Share of natural capital in national w ealth
1994 (%)
40
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = 0.42
Botswana
4
China
2
Norway
Indonesia
0
0
-2
1
2
3
4
5
6
7
8
9
New Zealand
Kenya
-4
-6
Corruption index 2000
10
Interpretation of results
Growth
Corruption
=
+
Resources
Growth
Corruption
Resources
Index of political liberties 1972-90
9
8
Benin
7
Niger
6
Madagascar
5
4
r = 0.48
3
India
2
Venezuela
1
0
0
20
40
Share of natural capital in national w ealth
1994 (%)
60
Growth of GNP per capita 1965-98, adjusted
for initial income (% per year)
6
r = -0.62
Botswana
4
Korea
2
China
Indonesia
0
0
2
4
6
-2
-4
Venezuela
-6
-8
Index of political liberties 1972-90
8
Interpretation of results
Growth
Oppression
=
+
Resources
Growth
Oppression
Resources
In sum, natural capital
tends to crowd out …
1. Real capital
via blunted incentives to save and invest
2. Human capital
through neglect of education
3. Social capital
through rent seeking, corruption, inequality,
civil and political oppression, etc.
4. Financial capital
through failure to develop institutions
5. Foreign capital
through protectionism
Old story:
The risks are real
David Landes (1998) tells the story
of Spain following the colonization
of South and Central America
which made Spain rich in gold
and other natural resources:
“Easy money is bad for you. It represents
short-run gain that will be paid for in
immediate distortions and later
regrets.”