Ecole Centrale de Marseille
Technopole de Château Gombert
38 rue Joliot-Curie
The sustainability of resource use and the management of public finances are both long-run issues that are linked to each other through savings decisions. To study them conjointly, this paper introduces a public debt stabilization constraint in an overlapping generation model in which nonrenewable resources constitute a necessary input in the production function and belong to agents. It shows that stabilization of public debt at a high level (as share of capital) may prevent the existence of a sustainable development path, that is, a path on which per capita consumption is not decreasing. Public debt thus appears as a threat to sustainable development. It also shows that higher public debt-to-capital ratios (and public expenditures-to-capital ones) are associated with lower growth. Two transmission channels are identified. As usual, public debt crowds out capital accumulation. In addition, public debt tends to increase resource use which reduces the rate of growth. We also provide a numerical analysis of the dynamics that shows that the economy is characterized by saddle path stability. Finally, we show that the public debt-to-capital ratio may be calibrated to implement the social planner optimal allocation according to which the growth rate is increasing in the degree of patience.
This chapter discusses whether the Middle East and North African (MENA) countries are prone to be cursed or blessed by their natural resources endowments. It thus reviews the literature on the resource curse theory. The existence of a resource curse is discussed and arguments against advocates of the resource curse are presented. Then, the resource curse transmission channels are presented. Finally, we present to what extent MENA countries are affected by the curse, drawing on existing literature as well as empirical data. The (scarce) literature shows that a resource curse may be underway in MENA economies. Broadly speaking, this literature often argues that the curse could be turned into a blessing through institutional improvements. The empirical data presented in this chapter tend to confirm this view. They show that the economic development of resource-rich MENAs has not been translated into human progress and has been largely non-inclusive. These results are stronger when the resource rent per capita is larger. Finally, the average institutional quality in resources-rich MENA countries appears to be lower than the average institutional quality in resources-poor MENA economies, suggesting some room for an institutional resource curse.
This paper analyses the effects of flow pollution implied by the use of necessary non-renewable resources, fossil fuel for example, on overlapping generations (OLG) economies. Notably, it shows that, on the balanced growth path, flow pollution reduces the (negative) resources contribution to growth and increases resources conservation, capital accumulation, and growth. Flow pollution thus increases the ability of an economy to sustain a non-decreasing consumption path. Some of the results are due to (or magnified by) the OLG structure of the economy. In addition, the paper highlights the need for public intervention and shows that the optimal allocation may be decentralized using a tax on resources use and transfers. JEL Codes: Q32, Q38, Q53.
This paper analyzes the behavior of cross-country growth rates with respect to resource abundance and dependence. We reject the linear model that is commonly used in growth regressions in favor of a multiple-regime alternative. Using a formal sample-splitting method, we find that countries exhibit different behaviors with respect to natural resources depending on their initial level of development. In high-income countries, natural resources play only a minor role in explaining the differences in national growth rates. On the contrary, in low-income countries, abundance seems to be a blessing but dependence restricts growth.
We here provide some evidence that the growth regression models used to test the resource curse should correctly account for heterogeneities between countries. We reproduce the results in a well-known article by Brunnschweiler and Bulte (2008) and then test their robustness. We show that the impact of resource dependence on growth strongly depends on the way in which we model heterogeneity. We find evidence of the resource curse in low-income countries.
The economic literature has shown that some countries may be trapped in what is called an ”environmental poverty trap”: poor longevity implies little maintenance of the environment, which leads to high levels of pollution that in turn keeps life expectancy low. Since life expectancy is an important determinant of saving, these economies may not be able to grow. This article aims to provide policy recommendations to improve both environmental quality and growth in the context of debt consolidation. Notably, it studies how public debt and public maintenance may be used to escape from the environmental poverty trap. A welfare analysis is then undertaken to show that public debt is an instrument which helps to solve the capital over-accumulation problem and to achieve environmental objectives.