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Fall 2012
ISSN 0890-913X
Volume 28, Number 1

Economic Growth, Economic Freedom, and the Resource Curse

Noel D. Campbell, University of Central Arkansas
Thomas J. Snyder, University of Central Arkansas
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TheJournalofPrivateEnterprise28(1),2012,2346EconomicGrowth,EconomicFreedom,andtheResourceCurseNoelD.CampbellUniversityofCentralArkansasThomasJ.SnyderUniversityofCentralArkansasAbstractThisstudyexaminestherelationshipbetweenresourceabundance,economicfreedom,andeconomicgrowth.Inacross-sectionalanalysis,wefindthatanabundanceofenergyisonlyacurseifitaffectseconomicfreedomandinvestment.Controllingforeconomicfreedomandinvestment,anabundanceofresourcesisnotnegativelyrelatedtogrowthbutrathermayincreaseeconomicgrowth.However,consistentwiththeliterature,wefindanabundanceofnaturalresourceshasanegativeimpactoneconomicfreedomandinvestment,whichleadstoanobservedresourcecurse.JELCodes:O11,O13,O43Keywords:Economicfreedom;Economicgrowth;ResourcecurseI.IntroductionManystudieshavedemonstratedthenegativerelationshipbetweennaturalresourceabundanceandeconomicgrowth.CountrieswithahighratioofnaturalresourceexportstoGDPhaveexperiencedslowgrowth,evenwhencontrollingforothervariablesthatmayaffecteconomicgrowth(SachsandWarner,1997;1999).Countrieswithalargeshareofnaturalcapitalaspartoftheirtotalcapital(physical,human,andnaturalcapital)haveexperiencedaloweconomicgrowthrate(GylfasonandZoega,2006).EvenatthestatelevelintheUnitedStates,thereseemstobearesourcecurse,asthosestatesthathadahighshareoftheiroutputfromtheprimarysectorhadaloweconomicgrowthrate(PapyrakisandGerlagh,2007).Countriesthatexportenergy,orrelylessonimportedenergythanothercountries,haveexperiencedalowgrowthrate(shownlaterinTable1A).Thisstudytestswhetherthisresourcecurseoccursfromnaturalresourcesnegativeeffectoneconomicfreedom.23
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