Abstract
The economic growth in a developing country endowed with a natural resource and with a resource-dependent economy can be based on its own investments in new technology. Conversely, it can rely on trade as a channel for technology diffusion from a technologically advanced country. The existence, uniqueness and stability of a sustainable growth path are proved under both assumptions. Our second concern is on the resource curse hypothesis. When the developing country does not export the natural resource but uses it as an essential input in the production of a final good, resource bounty is not a curse. Resource abundance increases long-run growth in the closed-economy scenario, and it is growth-neutral but consumption-enhancing when technology is transmitted from abroad through international trade.
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Notes
- 1.
Coe et al. (1997) reports that, in 1990, industrial countries accounted for 96 % of the world’s R&D expenditure. Ninety percent of the world’s patents originate from countries like the United States, Japan, Germany, France and the UK. The rest of the countries in the world are considered technological followers. For a recent study see Coe et al. (2009).
- 2.
An exception is Cabo et al. (2005), where a natural resource extracted in one country is traded in exchange for consumption goods. Although no technology is transferred through this trade channel, the consumption growth in the resource-dependent economy is a direct consequence of the economic growth in the industrialized country.
- 3.
Historically, the distribution of communal resources among the users is one of the solutions that the economic literature has proposed to avoid the overexploitation of open-access resources. This approach relies on an external authority, who distributes the property rights. However, researchers have recently proved that private property rights may emerge internally as a result of individual agents’ desire to avoid cost externalities. See Birdyshaw and Ellis (2007) and the real examples therein. Cabo et al. (2012) analyze how the ownership and distribution of the exploitation rights upon the natural resource may affect the sustainable growth rate for the two trading economies and the resource conservation.
Although the distribution of property rights among users can be easily established is same cases, like forestry, partitioning is unfeasible for other resources such as fisheries. Nevertheless, results hereafter remain valid if the resource is managed by some institution like a fishers’ association or cooperative that regulates the optimal exploitation of the resource.
- 4.
The time argument is eliminated when no confusion can arise.
- 5.
The hypothesis θ=0 is appropriate for forests or fish living close to the surface; whereas, θ=1 is suitable for bottom-dwelling fish (see Elíasson and Turnovsky 2004 and references therein).
- 6.
Our results are upheld for any iso-elastic utility function. For the sake of simplicity we have chosen the logarithmic expression.
- 7.
Under the assumption of perfect property rights, each consumer bears the full cost of their actions and the resource is used more efficiently than under open-access.
- 8.
Technology increases productivity in the final output sector. It does not, however affect the resource sector.
- 9.
The proofs of the propositions are available from the authors upon request.
- 10.
Transversality conditions together with the concavity of functions guarantee the optimality of the unique steady-state equilibrium.
- 11.
Subscript F denotes variables corresponding to the follower country.
- 12.
Our model assumes that families in country L consume final output imported from country F. However, families in country F do not import consumption goods from abroad. None of the properties and conclusions of the paper would be affected if consumers in country F are allowed to import final output.
- 13.
Subscript L denotes variables corresponding to the leading country.
- 14.
From now on superscript oe denotes open economy scenario.
- 15.
Transversality conditions together with the concavity of functions guarantee the optimality of the unique steady state equilibrium.
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Acknowledgements
We thank an anonymous reviewer for his/her helpful comments. The authors have been partially supported by MEC projects ECO2008-01551/ECON and ECO2011-24352. The projects are co-financed by FEDER funds. The third author acknowledges the support by COST Action IS1104 “The EU in the new economic complex geography: models, tools and policy evaluation”.
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Cabo, F., Martín-Herrán, G., Martínez-García, M.P. (2014). On the Effect of Resource Exploitation on Growth: Domestic Innovation vs. Technological Diffusion Through Trade. In: Moser, E., Semmler, W., Tragler, G., Veliov, V. (eds) Dynamic Optimization in Environmental Economics. Dynamic Modeling and Econometrics in Economics and Finance, vol 15. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-54086-8_11
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