Natural resource booms and inequality: Theory and evidence

B.V.G. Goderis, S.W. Malone

Research output: Contribution to journalArticleScientificpeer-review

37 Citations (Scopus)

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 non-traded 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 find evidence in support of the theory, especially for oil and mineral booms. We also find that uncertainty about future commodity prices increases long-run inequality.
Original languageEnglish
Pages (from-to)388-417
JournalThe Scandinavian Journal of Economics
Volume113
Issue number2
DOIs
Publication statusPublished - 2011

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