DP2594 Natural Resources, Education, and Economic Development

Author(s): Thorvaldur Gylfason
Publication Date: October 2000
Keyword(s): Economic Development, Natural Resources
JEL(s): O11
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2594

Economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries. Four main channels of transmission from abundant natural resources to stunted economic development are discussed: (a) the Dutch disease, (b) rent seeking, (c) overconfidence, and (d) neglect of education. Public expenditure on education relative to national income, expected years of schooling for girls, and gross secondary-school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries. Natural capital appears to crowd out human capital, thereby slowing down the pace of economic development.