Skip to main content
SpringerLink
Log in

Why Do Resource-Abundant Economies Grow More Slowly?

  • Published:
Journal of Economic Growth Aims and scope Submit manuscript

Abstract

This article suggests an alternative explanation for why resource-rich economies have lower growth rates: because they are likely to be living beyond their means. It is shown that overshooting the steady state's equilibrium consumption and investment can be optimal in a Ramsey growth model with natural resources. Therefore, the economy will converge to its steady state from above, displaying negative growth rates on the transition. A dynamic general equilibrium model is calibrated to the Venezuelan economy and shown to approximate the economy's performance over the oil boom years adequately.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Antivero, I. (1992). Series Estadísticas de Venezuela en los Ultimos Cincuenta Años. (vols. 1-5). Caracas: Banco Central de Venezuela.

    Google Scholar 

  • Banco Central de Venezuela. (Various years). Anuario de Cuentas Nacionales. Caracas: Banco Central de Venezuela.

  • Bulmer-Thomas,V. (1994). The Economic History of Latin America Since Independence. Cambridge: Cambridge University Press.

    Google Scholar 

  • Chenery, H. B., and M. Syrquin. (1986). “Typical Patterns of Transformation.” In Hollis Chenery, Sherman Robinson, and Moshe Syrquin, eds., Industrialization and Growth: A Comparative Study. New York: Oxford University Press.

    Google Scholar 

  • Clemente, L., and A. Puente. (1987). “La Matriz de Insumo Producto de Venezuela en 1984.” Mimeo, Instituto de Urbanismo, Universidad Central de Venezuela.

  • Collins, S. M., and B. Bosworth. (1996). “Economic Growth in East Asia: Accumulation vs. Assimilation.” Brookings Papers in Economic Activity 2, 135-191.

    Google Scholar 

  • Devarajan, S., H. Ghanem, and K. Thierfelder (1996) “Economic Reform and Labor Unions: A General-Equilibrium Analysis Applied to Bangladesh and Indonesia.” Mimeo, World Bank.

  • Dervis, K., J. de Melo, and S. Robinson. (1982). General Equilibrium Models for Development Policy. New York: Cambridge University Press.

    Google Scholar 

  • Enright, M. J., A. Francés, and S. Saavedra. (1994). Venezuela, el reto de la competitividad. Caracas: Ediciones IESA.

    Google Scholar 

  • Feldstein, M., and C. Horioka. (1980). “Domestic Saving and International Capital Flows.” Economic Journal 90, 314-329.

    Google Scholar 

  • Findlay, R. (1995). Factor Proportions, Trade, and Growth. Cambridge: MIT Press.

    Google Scholar 

  • Gelb, A. H. (1986). “Adjustment to Windfall Gains: A Comparative Analysis of Oil-Exporting Countries.” In J. Peter Neary, and Sweder van Wijnbergen, eds. Natural Resources and the Macroeconomy. Oxford: Basil Blackwell.

    Google Scholar 

  • Gelb, A. H., and Associates. (1988). Oil Windfalls: Blessing or Curse? New York: Oxford University Press.

    Google Scholar 

  • Ginsburgh, V., and J. L. Waelbroeck. (1981). Activity Analysis and General Equilibrium Modeling. Amsterdam: North-Holland.

    Google Scholar 

  • Hentschel, J. (1992). Imports and Growth in Highly Indebted Countries: An Empirical Study. New York: Springer-Verlag.

    Google Scholar 

  • Hodrick, R. J., and E. C. Prescott. (1997). “Postwar U.S. Business Cycles: An Empirical Investigation.” Journal of Money, Credit, and Banking 29, 1-16.

    Google Scholar 

  • Karl, T. L. (1997) The Paradox of Plenty: Oil Booms, Venezuela, and Other Petro-States. Berkeley: University of California Press.

    Google Scholar 

  • Lane, P., and A. Tornell. (1996). “Power, Growth, and the Voracity Effect.” Journal of Economic Growth 1, 213-241.

    Google Scholar 

  • Lewis, A. (1954). “Economic Development with Unlimited Supplies of Labour.” In Deepak Lal. ed., Development Economics. London: Elgar.

    Google Scholar 

  • Matsuyama, K. (1992). “Agricultural Productivity, Comparative Advantage, and Economic Growth.” Journal of Economic Theory 58, 317-334.

    Google Scholar 

  • Mendoza, E., and Martín Uribe. (1996). “The Syndrome of Exchange-Rate-Based Stabilizations and the Uncertain Duration of Currency Pegs.” Board of Governers of the Federal Reserve System, International Discussion Papers, 548.

  • Ministerio de Energía y Minas. (1976). Petroleo y otros datos estadisticos. Caracas: División de Imprenta y Reproducción del MEM.

    Google Scholar 

  • Naím, M. (1989). Las Empresas venezolanas: su gerencia. Caracas: Ediciones IESA.

    Google Scholar 

  • OCEI. (Various years). Anuario del Comercio Exterior de Venezuela. Caracas: Oficina Central de Estadística e Informática.

  • Ostry, J., and C. Reinhart. (1992). ”Private Saving and Terms of Trade Shocks: Evidence from Developing Countries.” IMF Staff Papers 39, 495-517.

    Google Scholar 

  • Paredes, C. (1993). “Productivity Growth in Venezuela: The Need to Break with the Past.” Mimeo, IESA.

  • Perotti, R. (1996). “Redistribution and Non Consumption Smoothing in an Open Economy.” Review of Economic Studies 63, 411-433.

    Google Scholar 

  • PDVSA. (1993). PDVSA Data Diskette Caracas: Petróleos de Venezuela, S. A.

    Google Scholar 

  • Rodríguez, G. (1981). Economía pública, planificación y capitalismo de estado en Venezuela. Caracas: Ediciones Corpoconsult.

    Google Scholar 

  • Rodríguez, G. (1986). Era Posible la Gran Venezuela? Caracas: Editorial Ateneo de Caracas.

    Google Scholar 

  • Sachs, J., and A. Warner. (1995). “Natural Resource Abundance and Economic Growth.” NBER Working Paper 5398.

  • Sachs, J., and A. Warner. (1997). “The Big Push, Natural Resource Booms and Growth.” Mimeo, Harvard Institute for International Development.

  • Seierstad, A., and K. Sydsaeter. (1987). Optimal control theory with economic applications. Amsterdam: North-Holland.

    Google Scholar 

  • Shoven, J. B., and J. Whalley. (1992). Applying General Equilibrium. New York: Cambridge University Press.

    Google Scholar 

  • Spraos, J. (1983). Inequalising Trade? A Study of Traditional North/South Specialisation in the Context of Terms of Trade Concepts. New York: Oxford University Press.

    Google Scholar 

  • Taylor, L. (1983). Structuralist Macroeconomics: Applicable Models for the Third World. New York: Basic Books.

    Google Scholar 

  • Tornell, A., and P. Lane. (1994). “Are Windfalls a Curse? A Non-Representative Agent Model of the Current Account and Fiscal Policy.” NBER Working Paper 4839.

  • World Bank. (1998). World Development Indicators 1998. Washington, DC: World Bank.

    Google Scholar 

  • Zenios, S. A. (1996). “Modelling Languages in Computational Economics: GAMS.” In Amman, H. M., Kendrick D. A., and Rust, J., eds., Handbook of Computational Economics (vol. 1). Amsterdam: North-Holland.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, University of Maryland, College Park, MD, 20742

    Francisco Rodriguez

  2. Harvard University and Harvard Institute for International Development, 1 Elliot Street, Cambridge, MA, 02138

    Jeffrey D. Sachs

Authors
  1. Francisco Rodriguez
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Jeffrey D. Sachs
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Rodriguez, F., Sachs, J.D. Why Do Resource-Abundant Economies Grow More Slowly?. Journal of Economic Growth 4, 277–303 (1999). https://doi.org/10.1023/A:1009876618968

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1009876618968

Search

Navigation