RESOURCE DEPENDENCE, KNOWLEDGE CREATION, AND GROWTH: REVISITING THE NATURAL RESOURCE CURSE

Several explanations have been put forward for the phenomenon- referred to as ‘curse of natural resources ’- that resource-rich countries tend to display low rates of economic growth. This paper studies an R&D-related explanation, using an endogenous growth model with natural resources and R&D-based technological change. For suitable values of preference parameters, the model predicts that knowledge creation as well as capital formation are inversely related to natural-resource intensity, thus providing an explanation for the ‘curse’. Estimation results on cross-sectional data for 77 countries (1965-1998) are consistent with these predictions. Basic results of the paper remain valid when institutional aspect