Natural resource wealth and directed technical change

Segal, Paul (2011) Natural resource wealth and directed technical change. Working Paper. University of Oxford, Oxford.

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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.

Item Type: Reports and working papers (Working Paper)
Keywords: economic growth; Dutch disease; natural resource wealth; directed technical change; distribution of income
Schools and Departments: University of Sussex Business School > Economics
Depositing User: Paul Segal
Date Deposited: 14 Sep 2012 08:44
Last Modified: 16 Jun 2015 10:29
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