Resource Curse or Malthusian Trap? Evidence from Oil Discoveries and Extractions

50 Pages Posted: 27 Sep 2009 Last revised: 18 Apr 2012

See all articles by Anca Cotet Grecu

Anca Cotet Grecu

Seton Hall University

Kevin K. Tsui

Clemson University - John E. Walker Department of Economics

Date Written: December 5, 2009

Abstract

This paper studies the effects of oil rent on development using a unique panel dataset describing worldwide oil discoveries and extractions. First, we revisit the so-called curse of oil, which contends that oil rent hinders economic development. Exploiting cross-country variations in the timing of oil discoveries and the size of initial oil in place, we find that, contrary to the oil-curse hypothesis, there is little robust evidence of a negative relationship between oil endowment and economic performance, even after controlling for initial income. Second, based on both cross-country and panel evidence, we find a robust association between oil abundance and population growth, which might suggest a Malthusian effect which reduces the economic growth measured in per capita GDP. We find some evidence that oil abundance increases fertility. On an accounting basis, however, migration plays an even more prominent role in explaining the oil-induced population growth. Furthermore, we show that focusing on material gain may understate the welfare gain from oil abundance, because relative to non-oil countries, oil-rich countries gain more in health improvements. These results suggest that despite the positive oil effect on population growth, oil-rich countries do not suffer from the Malthusian trap, and overall oil abundance is an economic blessing rather than a curse.

Keywords: resource curse, Malthusian trap, oil discoveries

JEL Classification: O13, O15, Q32, Q56

Suggested Citation

Cotet Grecu, Anca and Tsui, Kevin K., Resource Curse or Malthusian Trap? Evidence from Oil Discoveries and Extractions (December 5, 2009). Available at SSRN: https://ssrn.com/abstract=1478886 or http://dx.doi.org/10.2139/ssrn.1478886

Anca Cotet Grecu

Seton Hall University ( email )

400 S Orange Avenue
South Orange, NJ 07079
United States

Kevin K. Tsui (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

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