| By: |
Arezki, Rabah;
Alichi, Ali |
| Abstract: |
The paper provides an alternative explanation for the “resource curse” based
on the income effect resulting from high government current spending in
resource rich economies. Using a simple life cycle framework, we show that
private investment in the non-resource sector is adversely affected if private
agents expect extra government current spending financed through resource
sector revenues in the future. This income channel of the resource curse is
stronger for countries with lower degrees of openness and forward altruism. We
empirically validate these findings by estimating non-hydrocarbon sector
growth regressions using a panel of 25 oil-exporting countries over 1992–2005. |
| Keywords: |
resource curse; fiscal policy; investment and growth |
| JEL: |
O11 O41 C81 C01 Q30 |
| Date: |
2009–05 |
| URL: |
http://d.repec.org/n?u=RePEc:pra:mprapa:17130&r=ara |