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How should resource‐rich countries diversify? Estimating forward‐linkage effects of mining on productivity growth
Author(s) -
Joya Omar
Publication year - 2019
Publication title -
economics of transition and institutional change
Language(s) - English
Resource type - Journals
eISSN - 2577-6983
pISSN - 2577-6975
DOI - 10.1111/ecot.12191
Subject(s) - diversification (marketing strategy) , productivity , linkage (software) , resource (disambiguation) , panel data , resource productivity , production (economics) , natural resource economics , economics , business , resource curse , international trade , natural resource , resource allocation , economic growth , macroeconomics , market economy , biology , ecology , econometrics , computer network , biochemistry , marketing , computer science , gene
Resource‐rich countries willing to diversify their economies are faced with dual policy options; to either develop resource‐based industries, or diversify their economies as a whole and invest into new activities that are not necessarily resource dependent. Not only does the economic theory fail to provide a consensual guidance on this issue but empirical evidence is also lacking. This paper empirically assesses which of these two patterns of diversification is associated with higher productivity growth outcomes for resource‐rich countries. Using panel data for 50 resource‐abundant countries over the period 1970–2010, I find that stronger downstream linkages to mining and extractives do not lead to productivity enhancements. Broadening and diversifying the production structure as a whole offers potential for productivity growth at higher levels of income.