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Natural resource wealth and directed technical change

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posted on 2023-06-07, 19:47 authored by Paul Segal
This paper analyses the e¤ect of a resource discovery on an open economy with endogenous directed technical change. Technical progress depends on entrepreneurs who produce (or adopt) technology, and endogenously choose which sector to operate in. The static e¤ect of a resource discovery is de- industrialization and a rise in non-resource factor incomes, as in standard trade theory. Dynamically, the "brain drain" of entrepreneurs into the re- source sector may exacerbate the de-industrialization over time, but if the discovery is not su¢ ciently large then it leads to temporarily lower growth in non-resource factor incomes, which are lower in the long run than without the discovery. In this case non-resource owners are made worse off by the discov- ery. Second best trade or investment policies that direct entrepreneurs away from the resource sector may be used to raise long-run non-resource income, at a cost to GDP.

History

Publication status

  • Published

Publisher

University of Oxford

Pages

33.0

Place of publication

Oxford

Department affiliated with

  • Economics Publications

Institution

University of Oxford

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-09-14

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