On the Effect of Resource Exploitation on Growth: Domestic Innovation vs. Technological Diffusion Through Trade

Abstract: The economic growth in a developing country endowed with a natural resource and with a resource-dependent economy can be based on its own investments in new technology. Conversely, it can rely on trade as a channel for technology diffusion from a technologically advanced country. The existence, uniqueness and stability of a sustainable growth path are proved under both assumptions. Our second concern is on the resource curse hypothesis. When the developing country does not export the natural resource but uses it as an essential input in the production of a final good, resource bounty is not a curse. Resource abundance increases long-run growth in the closed-economy scenario, and it is growth-neutral but consumption-enhancing when technology is transmitted from abroad through international trade