2014-05: The spatial curse of natural resources (Working paper)

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Carmignani, Fabrizio
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Rohde, Nicholas

Naranpanawa, Athula

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2014
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25 pages

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Abstract

What are the macroeconomic implications of having a resource-rich neighbour? The voluminous literature on the curse of natural resources exclusively focuses on "domestic" effects; that is, how resource intensity in country i affects country i's development. Still, there are good reasons to believe that the effects of natural resources can spread across the borders. This paper is a first attempt at understanding how the resources located in country j affect the income dynamics of its neighbour country i. Using a standard spatial econometrics approach, a measure of neighbourhood resource intensity is constructed for each of 147 countries. This measure, together with domestic resource intensity and a set of controls to account for the role of geography, culture, and institutional quality, is used as an explanatory variable in income and growth regressions. The main finding is that neighbourhood resource intensity reduces domestic income and growth, while domestic resource intensity has generally no negative effect. Interestingly, the negative spatial effect of natural resources becomes statistically less significant (and possible even insignificant) when neighbourhoods are characterized by higher income and better institutions. This in turn provides some ground for interpretation and policy recommendations.

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Copyright © 2010 by author(s). No part of this paper may be reproduced in any form, or stored in a retrieval system, without prior permission of the author(s).

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Economics and Business Statistics

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O13 - Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products

C31 - Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Inte

O11 - Macroeconomic Analyses of Economic Development

O40 - Economic Growth and Aggregate Productivity: General

Spatial resource curse

income regressions

growth regressions

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