Resource windfalls, innovation, and growth

E. Papyrakis

Research output: Contribution to JournalArticleAcademicpeer-review

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Abstract

This paper explores the connection between resource abundance and innovation, as a transmission mechanism that can elucidate part of the resource curse hypothesis, i.e. the observed negative impact of resource wealth on income growth. We develop a variation of the Ramsey-Cass-Koopmans model with endogenous growth to explain the phenomenon. In this model, consumers trade off leisure versus consumption, and firms trade off innovation efforts versus manufacturing. We show that an increase in resource income frustrates economic growth in two ways: directly by reducing work effort and indirectly by inducing a smaller proportion of the labor force to engage in innovation. © 2011 Taylor and Francis Group, LLC.
Original languageEnglish
Pages (from-to)301-312
JournalJournal of Economic Policy Reform
Volume14
Issue number4
DOIs
Publication statusPublished - 2011

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