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Natural Resource Booms and Inequality: Theory and Evidence

Author

Listed:
  • Benedikt Goderis
  • Samuel W. Malone
Abstract
We develop a theory, in the context of a two-sector growth model in which learning-by-doing drives growth, to explain the time path of income inequality following natural resource booms in resource rich countries. Under the condition of a relatively unskilled labor intensive nontraded sector, inequality falls immediately after a boom, and then increases steadily over time until the initial impact of the boom disappears. Using data for 90 countries between 1965 and 1999, we .nd evidence in support of the theory, especially for oil and mineral booms. We also .nd that uncertainty about future commodity prices increases long-run inequality.

Suggested Citation

  • Benedikt Goderis & Samuel W. Malone, 2008. "Natural Resource Booms and Inequality: Theory and Evidence," OxCarre Working Papers 008, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:008
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    More about this item

    Keywords

    Dutch Disease; Windfalls; Commodity Prices;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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