Collier, Paul and Goderis, Benedikt (2008): Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum.
Download (269kB) | Preview
Currently, evidence on the ‘resource curse’ yields a conundrum. While there is much cross section evidence to support the curse hypothesis, time series analyses using vector autoregressive (VAR) models have found that commodity booms raise the growth of commodity exporters. This paper adopts panel cointegration methodology to explore longer term effects than permitted using VARs. We find strong evidence of a resource curse. Commodity booms have positive short-term effects on output, but adverse long-term effects. The long-term effects are confined to “high-rent”, non-agricultural commodities. We also find that the resource curse is avoided by countries with sufficiently good institutions. We test the channels of the resource curse proposed in the literature and find that it is explained by real exchange rate appreciation and public and private consumption. Our findings have important implications for non-agricultural commodity exporters with weak institutions, especially in light of the current unprecedented boom in global commodity prices.
|Item Type:||MPRA Paper|
|Original Title:||Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum|
|English Title:||Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum|
|Keywords:||commodity prices; natural resource curse; growth|
|Subjects:||O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms
|Depositing User:||Benedikt Goderis|
|Date Deposited:||16. Sep 2009 14:11|
|Last Modified:||19. Feb 2013 00:42|
Acemoglu, Daron and James A. Robinson, “Inefficient Redistribution,” American Political Science Review 95 (2001), 649-661.
Acemoglu, Daron, James A. Robinson and Simon Johnson, “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91 (2001), 1369-1401.
Alexeev, Michael and Robert Conrad, “The Elusive Curse of Oil,” Review of Economics and Statistics (forthcoming).
Baland, Jean-Marie and Patrick Francois, “Rent-Seeking and Resource Booms,” Journal of Development Economics 61 (2000), 527-542.
Barro, Robert J., and Jong-Wha Lee, “International Data on Educational Attainment: Updates and Implications,” CID Working Paper no. 42 (2000).
Brunnschweiler, Christa N. and Erwin H. Bulte, “The Natural Resource Curse Revisited and Revised: A Tale of Paradoxes and Red Herrings,” Journal of Environmental Economics and Management 55 (2008), 248-264.
Collier, Paul, “On the Economic Consequences of Civil War,” Oxford Economic Papers 51 (1999), 168-183.
Collier, Paul and Anke Hoeffler, “Greed and Grievance in Civil Wars,” Oxford Economic Papers 56 (2004), 563-595.
Corden, W. Max, and J. Peter Neary, “Booming Sector and De-Industrialization in a Small Open Economy,” The Economic Journal 92 (1982), 825-848.
Deaton, Angus S. and Ronald I. Miller, “International Commodity Prices, Macroeconomic Performance, and Politics in Sub-Saharan Africa”, Princeton Studies in International Finance 79 (1995).
Dehn, Jan, “Commodity Price Uncertainty in Developing Countries,” CSAE Working Paper no. 2000-12 (2000).
Gleditsch, Kristian S., “A Revised List of Wars Between and Within Independent States, 1816-2002,” International Interactions 30 (2004), 231-262.
Goderis, Benedikt and Vasso P. Ioannidou, “Do High Interest Rates Defend Currencies During Speculative Attacks? New Evidence,” Journal of International Economics 74 (2008), 158–169.
Gylfason, Thorvaldur, “Natural Resources, Education, and Economic Development,” European Economic Review 45 (2001), 847-859.
Gylfason, Thorvaldur, Tryggvi Thor Herbertsson and Gylfi Zoega, “A Mixed Blessing: Natural Resources and Economic Growth,” Macroeconomic Dynamics 3 (1999), 204-225.
Gylfason, Thorvaldur and Gylfi Zoega, “Natural Resources and Economic Growth: The Role of Investment,” The World Economy 29 (2006), 1091-1115.
Hall, Robert E. and Charles I. Jones, “Why Do Some Countries Produce So Much More Output per Worker than Others?,” Quarterly Journal of Economics 114 (1999), 83-116.
Henisz, Witold J., “The Institutional Environment for Infrastructure Investment,” Industrial and Corporate Change 11 (2002), 355-389.
Hodler, Roland, “The Curse of Natural Resources in Fractionalized Countries,” European Economic Review 50 (2006), 1367-1386.
Im, Kyung S., M. Hashem Pesaran and Yongcheol Shin, “Testing for Unit Roots in Heterogeneous Panels,” Journal of Econometrics 115 (2003), 53-74.
Maddala, G.S. and Shaowen Wu, “A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test,” Oxford Bulletin of Economics and Statistics 61 (1999), 631-652.
Mansoorian, Arman, “Resource Discoveries and ‘Excessive’ External Borrowing,” The Economic Journal 101 (1991), 1497-1509.
Manzano, Osmel and Roberto Rigobon, “Resource Curse or Debt Overhang?,” in Daniel Lederman and William F. Maloney (Eds.), Natural Resources, Neither Curse nor Destiny (Stanford: Stanford University Press and World Bank, 2006).
Matsen, Egil and Ragnar Torvik, “Optimal Dutch Disease,” Journal of Development Economics 78 (2005), 494-515.
Mehlum, Halvor, Karl Moene and Ragnar Torvik, “Institutions and the Resource Curse,” The Economic Journal 116 (2006), 1-20.
Michaels, Guy, “The Long-Term Consequences of Regional Specialization,” CEPR Discussion Paper no. 6028 (2006).
Pedroni, Peter, “Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors,” Oxford Bulletin of Economics and Statistics 61 (1999), 653-670.
Raddatz, Claudio, “Are External Shocks Responsible for the Instability of Output in Low-Income Countries?,” Journal of Development Economics 84 (2007), 155-187.
Robinson, James A., and Ragnar Torvik, “White Elephants,” Journal of Public Economics 89 (2005), 197-210.
Robinson, James A., Ragnar Torvik and Thierry Verdier, “The Political Foundations of the Resource Curse,” Journal of Development Economics 79 (2006), 447-468.
Sachs, Jeffrey D. and Andrew M. Warner, “Natural Resource Abundance and Economic Growth,” NBER Working Paper no. 5398 (1995a, revised 1997, 1999).
Sachs, Jeffrey D. and Andrew M. Warner, “Economic Reform and the Process of Global Integration,” Brookings Papers on Economic Activity 1 (1995b), 1-118.
Sachs, Jeffrey D. and Andrew M. Warner, “The Big Push, Natural Resource Booms and Growth,” Journal of Development Economics 59 (1999), 43-76.
Sachs, Jeffrey D. and Andrew M. Warner, “The Curse of Natural Resources,” European Economic Review 45 (2001), 827-838.
Sala-i-Martin, Xavier and Arvind Subramanian, “Addressing the Natural Resource Curse: An Illustration from Nigeria,” NBER Working Paper no. 9804 (2003).
Skaperdas, Stergios, “Warlord competition,” Journal of Peace Research 39 (2002), 435-446.
Sokoloff, Kenneth L. and Stanley L. Engerman, “Institutions, Factor Endowments, and Paths of Development in the New World”, Journal of Economic Perspectives 14 (2000), 217-232.
Tornell, Aaron and Philip R. Lane, “The Voracity Effect,” American Economic Review 89 (1999), 22-46.
Torvik, Ragnar, “Learning By Doing and the Dutch Disease,” European Economic Review 45 (2001), 285-306.
Torvik, Ragnar, “Natural Resources, Rent Seeking and Welfare,” Journal of Development Economics 67 (2002), 455-470.
Van der Ploeg, Frederick, “Challenges and Opportunities for Resource Rich Economies,” Journal of Economic Literature (forthcoming, 2007).
Van Wijnbergen, Sweder J. G., “The Dutch Disease: a Disease after All?,” Economic Journal 94 (1984), 41-55.
Wick, Katharina and Erwin H. Bulte, “Contesting Resources – Rent Seeking, Conflict and the Natural Resource Curse,” Public Choice 128 (2006), 457-476.
Wooldridge, Jeffrey, Econometric Analysis of Cross Section and Panel Data, MIT Press, Cambridge, MA, 2002.
World Bank, Where is the Wealth of Nations? Measuring Capital for the 21st Century, International Bank for Reconstruction and Development/World Bank, Washington DC, 2006.