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

58 Pages Posted: 15 Oct 2005 Last revised: 16 Apr 2023

See all articles by Josef Falkinger

Josef Falkinger

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Volker Grossmann

University of Fribourg - Faculty of Economics and Social Science; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Abstract

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.

Keywords: oligopsony power, institutions, entrepreneurship, economic development, distribution, credit constraints, political elites

JEL Classification: O10, H50

Suggested Citation

Falkinger, Josef and Grossmann, Volker, Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites. IZA Discussion Paper No. 1756, CESifo Working Paper Series No. 1562, Available at SSRN: https://ssrn.com/abstract=822766 or http://dx.doi.org/10.2139/ssrn.822766

Josef Falkinger

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Volker Grossmann (Contact Author)

University of Fribourg - Faculty of Economics and Social Science ( email )

Fribourg, CH 1700
Switzerland

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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