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A MIXED BLESSING: Natural Resources and Economic Growth

  • Thorvaldur Gylfason (a1), Tryggvi Thor Herbertsson (a2) and Gylfi Zoega (a3)
    • Published online: 01 June 1999
Abstract

This paper diagnoses the symptoms of the Dutch disease in a two-sector stochastic endogenous growth model. A productive, low-skill-intensive primary sector causes the currency to appreciate in real terms, thus hampering the development of a high-skill-intensive secondary sector and thereby reducing growth. Moreover, the volatility of the primary sector generates real-exchange-rate uncertainty and may thus reduce investment and learning in the secondary sector and hence also growth. Cross-sectional and panel regressions based on data for 125 countries in the period 1960–1992 confirm a statistically significant inverse relationship between the size of the primary sector and economic growth, but not between the volatility of the real exchange rate and growth.

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Corresponding author
Address correspondence to: T. Gylfason, University of Iceland, Odda v/Sturlugotu, IS-101 Reykjavik, Iceland, SNS, Stockholm, and CEPR; e-mail gylfason@hi.is.
T. Herbertsson, Institute of Economic Studies, University of Iceland, Odda v/Sturlugotu, IS-101 Reykjavik, Iceland, and University of Aarhus; e-mail tthh@hi.is.
G. Zoega, Birkbeck College, University of London, 7-15 Gresse Street, London W1P 2LL; e-mail gzoega@econ.bbk.ac.uk
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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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