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Evidence from cross-sectional growth regressions suggests that economies dependent on natural resource exports have had slower growth than resource scarce economies. Explanations for this "curse of resources" focus on institutional and market failures caused by resource abundance. With a simple two sector model exhaustible resource model, we demonstrate that the correlation between growth and natural resource abundance can be negative in the absence of market and institutional failures. Since there is no way to distinguish between efficient and inefficient equilibria on the basis of the negative correlation between growth and resource abundance, finding that correlation is not sufficient to conclude resources are...
Evidence from cross-sectional growth regressions suggests that economies dependent on natural resource exports have had slower growth than resource scarce economies. Explanations for this "curse of resources" focus on institutional and market failures caused by resource abundance. With a simple two sector model exhaustible resource model, we demonstrate that the correlation between growth and natural resource abundance can be negative in the absence of market and institutional failures. Since there is no way to distinguish between efficient and inefficient equilibria on the basis of the negative correlation between growth and resource abundance, finding that correlation is not sufficient to conclude resources are...