Resource Abundance and Economic Development

By R. M. Auty | Go to book overview


Until recently, most economists have neglected the role that natural resources play in economic development. They have reported sharp differences in the performance of differing countries and regions, but the connection with the natural resource endowment has either been ignored or, at best, underestimated. This book corrects this neglect by synthesizing research from numerous subfields within the economics literature that have hitherto tended to be isolated from each other. The synthesis builds a strong case for the fact that since the 1960s the natural resource endowment of a developing country has strongly affected the efficiency with which it uses capital and the nature of its long-term developmental trajectory.

The book distils the basic findings into two distinct models and then increases their explanatory power by introducing permutations to allow for differences in the specific character of the natural resource endowment. The first model is the staple trap model and it is strongly associated with resource-abundant development. It shows how trade policy closure leads to the misallocation of inputs that depress investment efficiency and retard (and even reverse) the competitive diversification of the economy so that the economy becomes vulnerable to a growth collapse. The staple trap model is also associated with social tensions that stem from heightened income inequality, a retarded passage through the demographic cycle, an unfavourable dependency/worker ratio, the slow acquisition of skills and the tardy accumulation of the public social capital that an increasingly sophisticated economy requires in order to lower transaction costs. Recovery from a growth collapse is protracted because all forms of capital (natural, physical, human and social) tend to be eroded. Policies are required that go beyond the 'prudent macro and micro' measures of the Washington Consensus. Governments must also address more deep-seated issues that include bolstering the more positive features of the political state, the accumulation of public institutional capital and recognition of the various impacts that different forms of natural capital introduce into the economic trajectory.

The second model of competitive industrialization is associated with resource-poor countries, albeit not exclusively so. Appropriate policies can avert a growth collapse in resource-abundant countries as a handful of countries that includes Malaysia shows. The competitive industrialization model sustains a relatively open trade policy from a low level of per capita income that promotes labour-intensive manufactured exports that quickly absorb surplus rural labour. This sets in train a virtuous circle of equitable income distribution, the rapid accumulation of human and social capital, an accelerated passage through the demographic cycle and the speedy emergence of a dependency/worker ratio that is highly favourable to saving and investment. Rates of capital investment quickly rise above 25 per cent of GDP without significant loss in investment efficiency and the economy diversifies competitively so that growth is rapid and egalitarian as well as being environmentally and socially sustainable.


Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this page

Cited page

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Cited page

Bookmark this page
Resource Abundance and Economic Development
Table of contents

Table of contents

  • Unu World Institute for Development Economics Research (Unu/Wider) ii
  • Resource Abundance and Economic Development iii
  • Foreword v
  • Acknowledgements vii
  • Contents ix
  • List of Tables xi
  • List of Figures xiv
  • List of Contributors xv
  • Part I Introduction 2
  • 1: Introduction and Overview 3
  • References 15
  • Part II Critical Parameters in Resource-Based Development Models 18
  • 3: The Sustainability of Extractive Economies 36
  • Appendix 3.1 Deriving Net Income and Genuine Saving 46
  • References 55
  • References 73
  • Part III Long-Term Perspective On, and Models Of, Resource-Based Growth 94
  • References 109
  • 7: Short-Run Models of Contrasting Natural Resource Endowments 113
  • References 124
  • References 142
  • Part IV Development Trajectories of Resource-Abundant Countries 145
  • 9: Competitive Industrialization with Natural Resource Abundance 147
  • References 163
  • 10: A Growth Collapse with Diffuse Resources 165
  • References 177
  • References 191
  • 12: A Growth Collapse with High Rent Point Resources 193
  • References 206
  • 13: Large Resource-Abundant Countries Squander Their Size Advantage 208
  • References 220
  • Part V Lessons for Policy Reform 223
  • References 237
  • 15: Growth, Capital Accumulation, and Economic Reform in South Africa 239
  • Appendix 15.1 257
  • References 258
  • 16: Reforming Resource-Abundant Transition Economies 260
  • References 275
  • References 294
  • 18: A Nordic Perspective on Natural Resource Abundance 296
  • Part VI Conclusions 314
  • 19: Conclusions 315
  • References 327
  • Index 329


Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen
/ 340

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.