Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites

This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.

[1]  Oded Galor,et al.  Das Human Kapital , 2003 .

[2]  R. MacDonald,et al.  Trade Costs, Trade Balances and Current Accounts: An Application of Gravity to Multilateral Trade , 2005, SSRN Electronic Journal.

[3]  A. Field Economic and Demographic Determinants of Educational Commitment: Massachusetts, 1855 , 1979, The Journal of Economic History.

[4]  Kenneth L. Sokoloff,et al.  Inequality, institution and differential paths of growth among New World economies , 2000 .

[5]  F. Ploeg Chapter 34 The Making of Cultural Policy: A European Perspective⁎ , 2005 .

[6]  Volker Grossmann,et al.  Institutions and Development: The Interaction Between Trade Regime and Political System , 2004, SSRN Electronic Journal.

[7]  Ragnar Torvik,et al.  Natural resources, rent seeking and welfare , 2002 .

[8]  J. Gerber Public school expenditures in the plantation states, 1910 , 1991 .

[9]  R. Morse The Development of Urban Systems in the Americas in the Nineteenth Century , 1975 .

[10]  Rainer Niemann,et al.  Group Taxation, Asymmetric Taxation and Cross-Border Investment Incentives in Austria , 2005, SSRN Electronic Journal.

[11]  Inequality and Institutions , 2004 .

[12]  Xenia Matschke Costly Revenue-Raising and the Case for Favoring Import-Competing Industries , 2005, SSRN Electronic Journal.

[13]  Charles G. Pregger-Román The Origin and Development of the Bourgeoisie in Nineteenth-Century Chile , 1983 .

[14]  P. Lane,et al.  Power, growth, and the voracity effect , 1996 .

[15]  W. Glade,et al.  The Latifundio and the City in Latin American History.@@@The Rural Society of Latin America Today. Three Papers Presented at the Second Scandinavian Research Conference in Copenhagen 4-6 May 1973. , 1975 .

[16]  Kiminori Matsuyama,et al.  Financial Market Globalization, Symmetry-Breaking, and Endogenous Inequality of Nations , 2004 .

[17]  A. Kemnitz Can Immigrant Employment Alleviate the Demographic Burden? The Role of Union Centralization , 2005, SSRN Electronic Journal.

[18]  A. Maddison,et al.  The World Economy: Historical Statistics , 2003 .

[19]  T. Piketty,et al.  The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing , 1997 .

[20]  W. Peters,et al.  Justifying the Lindahl solution as an outcome of fair cooperation , 2005, SSRN Electronic Journal.

[21]  W. Easterly,et al.  Tropics, Germs, and Crops: How Endowments Influence Economic Development , 2002 .

[22]  John S. Earle,et al.  Business Start-Ups or Disguised Unemployment? Evidence on the Character of Self-Employment from Transition Economies , 2000 .

[23]  Roland Bénabou,et al.  Inequality and Growth , 1996, NBER Macroeconomics Annual.

[24]  Thierry Verdier,et al.  Political Foundations of the Resource Curse , 2002 .

[25]  Thorvaldur Gylfason,et al.  Natural resources, education, and economic development , 2000 .

[26]  Paul De Grauwe,et al.  Non-Linearities in the Relation between the Exchange Rate and its Fundamentals , 2005, SSRN Electronic Journal.

[27]  Kiminori Matsuyama,et al.  Agricultural Productivity, Comparative Advantage and Economic Growth , 1991 .

[28]  Oded Galor,et al.  Das Human Kapital: A Theory of the Demise of the Class Structure , 2004 .

[29]  Friedrich Katz Labor Conditions on Haciendas in Porfirian Mexico: Some Trends and Tendencies , 1974 .

[30]  B. Bernanke,et al.  Agency Costs, Net Worth, and Business Fluctuations , 1988 .

[31]  J. Mcmillan,et al.  Journal of Economic Perspectives—Volume 16, Number 3—Summer 2002—Pages 153–170 The Central Role of Entrepreneurs in Transition Economies , 2022 .

[32]  R. Lucas Making a miracle , 1993 .

[33]  Gavin Wright The Economic Revolution in the American South , 1987 .

[34]  S. J. Stein,et al.  Principal Currents in the Economic Historiography of Latin America , 1971, The Journal of Economic History.

[35]  Kenneth L. Sokoloff,et al.  Colonialism, Inequality, and Long-Run Paths of Development , 2005 .

[36]  S. Engerman Douglass C. North’s The Economic Growth of the United States, 1790-1860 Revisited , 1961, Social Science History.

[37]  T. Beck,et al.  Institution building and growth in transition economies , 2005 .

[38]  Ragnar Torvik,et al.  Institutions and the Resource Curse , 2006 .

[39]  Annalisa Luporini,et al.  Ownership Concentration, Monitoring and Optimal Board Structure , 2005, SSRN Electronic Journal.

[40]  R. Pond Growing public – social spending and economic growth since the eighteenth century , 2004 .

[41]  A. Bauer Rural Workers in Spanish America: Problems of Peonage and Oppression , 1979 .

[42]  Oded Galor,et al.  Trading Population for Productivity , 2004 .

[43]  Antonis Adam,et al.  Turkish Delight for Some, Cold Turkey for Others?: The Effects of the Eu-Turkey Customs Union , 2005, SSRN Electronic Journal.

[44]  C. Keuschnigg,et al.  A growth oriented dual income tax , 2005, SSRN Electronic Journal.

[45]  Some Foundations of Economic Development in the Upper East Tennessee Valley, 1850-1900 , 1956, Journal of Political Economy.

[46]  Joseph Zeira,et al.  Income Distribution and Macroeconomics , 1988 .

[47]  Stanley L. Engerman,et al.  History Lessons Institutions, Factor Endowments, and Paths of Development in the New World , 2000 .

[48]  M. Gradstein Inequality, Democracy and the Protection of Property Rights , 2007 .

[49]  T. Schweigert Agricultural Wage Rates Under Forced and Free Labour: Pre-1944 and Post-1954 Guatemala , 2004 .

[50]  David S. Evans,et al.  Curing Sinus Headaches and Tying Law: An Empirical Analysis of Bundling Decongestants and Pain Relievers , 2005, SSRN Electronic Journal.

[51]  Peter A. Zadrozny Necessary and Sufficient Restrictions for Existence of a Unique Fourth Moment of a Univariate Garch(P,Q) Process , 2005, SSRN Electronic Journal.

[52]  James A. Robinson,et al.  Institutions as a Fundamental Cause of Long-Run Growth , 2005 .

[53]  Saku Aura,et al.  Optimal Commodity Taxation When Land and Structures Must Be Taxed at the Same Rate , 2005 .

[54]  A. Banerjee,et al.  Occupational Choice and the Process of Development , 1993, Journal of Political Economy.

[55]  J. Williamson,et al.  What Explains Wage Gaps between Farm and City? Exploring the Todaro Model with American Evidence, 1890-1941 , 1992, Economic Development and Cultural Change.

[56]  Eugene W. Ridings Interest Groups and Development: the Case of Brazil in the Nineteenth Century , 1977, Journal of Latin American Studies.

[57]  S. Guriev,et al.  Oligarchs: The Past or the Future of Russian Capitalism? , 2004 .

[58]  Panu Poutvaara Social Security Incentives, Human Capital Investment and Mobility of Labor , 2005, SSRN Electronic Journal.

[59]  Jane M. Loy Primary Education during the Colombian Federation: The School Reform of 1870 , 1971 .

[60]  Dan Hazen The Politics of Schooling in the Nonliterate Third World: The Case of Highland Peru , 1978, History of Education Quarterly.

[61]  L. Danziger Output Effects of Inflation with Fixed Price- and Quantity-Adjustment Costs , 2005, SSRN Electronic Journal.

[62]  M. Gradstein,et al.  The Industrial Revolution, Political Transition, and the Subsequent Decline in Inequality in 19th-Century Britain , 1999 .

[63]  H. Gersbach,et al.  Self-Financing Environmental Mechanisms , 2005, SSRN Electronic Journal.

[64]  A. Glazer,et al.  Subsidizing Enjoyable Education , 2005, SSRN Electronic Journal.

[65]  Claude Ménard,et al.  Institutions, Contracts and Organizations , 2000 .

[66]  Janet L. Yellen,et al.  The Fair Wage-Effort Hypothesis and Unemployment , 1990 .

[67]  Jeffrey D. Sachs,et al.  The curse of natural resources , 2001 .

[68]  B. Olivier,et al.  Florencio Lopez-de-Silanes, and Andrei Shleifer. , 1994 .

[69]  M. Gérard Multijurisdictional Firms and Governments' Strategies Under Alternative Tax Designs , 2005, SSRN Electronic Journal.

[70]  Piotr Wdowinski,et al.  Financial Markets and Economic Growth in Poland: Simulations with an Econometric Model , 2005, Social Science Research Network.

[71]  Nathan Rosenberg,et al.  A General Purpose Technology at Work: The Corliss Steam Engine in the Late 19th Century , 2001 .

[72]  P. Lindert Social Spending and Economic Growth , 2004 .

[73]  Stefan C. Wolter,et al.  Demographic Change and Public Education Spending: A Conflict between Young and Old? , 2005, SSRN Electronic Journal.

[74]  Tobias Kronenberg The Curse of Natural Resources in the Transition Economies , 2004 .

[75]  H. Verbon,et al.  The international spillover effects of pension reform , 2005, SSRN Electronic Journal.

[76]  Robert J. Gary-Bobo,et al.  Sharing Budgetary Austerity Under Free Mobility and Asymmetric Information: An Optimal Regulation Approach to Fiscal Federalism , 2005, SSRN Electronic Journal.

[77]  Silke Uebelmesser,et al.  Migration and the welfare state: The economic power of the non-voter? , 2005, SSRN Electronic Journal.

[78]  P. Bolton,et al.  A Theory of Trickle-Down Growth and Development , 1997 .

[79]  A. Glazer,et al.  The Desire for Impact , 2005, SSRN Electronic Journal.

[80]  M. Centeno Blood and Debt: War and Taxation in Nineteenth‐Century Latin America1 , 1997, American Journal of Sociology.

[81]  Philippe Aghion,et al.  The Effect of Financial Development on Convergence , 2005 .

[82]  R. Disney Household Saving Rates and the Design of Social Security Programmes: Evidence from a Country Panel , 2005, SSRN Electronic Journal.

[83]  Oded Galor,et al.  Land Inequality and the Emergence of Human Capital Promoting Institutions , 2005 .

[84]  Do Institutions Cause Growth? , 2004 .

[85]  Thorvaldur Gylfason,et al.  A MIXED BLESSING , 1999, Macroeconomic Dynamics.