Written by Jeffrey D. Sachs and Andrew M. Warner, the paper, "Natural Resource Abundance and Economic Growth", was presented to a seminar for the Harvard Institute for International Development in November 1997. The primary finding by the researchers was that there was a negative association between economic growth (as measured by GDP) and abundance of natural resources in studied countries (Sachs & Warner, p. 2). That is, countries with less natural resources showed greater economic growth during the 20-year period from 1970-1990 (Sachs & Warner, 3). Historically, the researchers contend that such an association can be explained by so-called Dutch disease models (Sachs & Warner, 6). This study is important insofar as it attempts to describe the dynamics of economic growth as related to natural resource abundance. Thus, all kinds of information can be gleaned from this study, such as the labor and capital required for economic growth in a country with a low natural resource abundance versus a country with a high natural resource abundance. Such information increases our understanding of how natural resources are intertwined with economic development.
The method used by this study are simply the collection of economic (growth) data regarding the countries in the study. Data was subsequently analyzed using statistical methods, such as SOPEN (Sachs & Warner, 12). SOPEN assigns a numerical value of 1 to countries that had globally-integrated economies from the years 1965-1989 (Sachs & Warner, 13). Another significant variable that is used in the study is RL -- the rule of law variable Sachs & Warner, 12). RL shows what impact a country's laws, such as governmental policies, have on the rate of economic development in relation to natural resource abundance (Sachs & Warner, 13).
The researchers rely on two main hypotheses to explain their data correlations. First, they posit that a high abundance of natural resources lead to corruption, less-efficient governments, and "increased rent-seeking" (Sachs & Warner, 21). The second hypothesis explains the negative correlation is that the state responds to resource abundance with protectionist strategies (Sachs & Warner 21).
Overall, this paper is very informative, and presents interesting theories regarding the negative association between natural resource abundance and economic growth of several countries over a lengthy time period. As carefully as this study was conducted and its data analyzed, the research did not take into account technological advances that could explain dramatic changes in economic growth over the sampled time period (The World Bank, 117). Moreover, the study does not present the reader with any evidence whatsoever that sustainable management is a key factor in maintaining the economies of developing countries, thereby defraying typical "boom and bust" cycles of economic growth (Barbier, internet). However, this study was thorough, and took the risk of collecting, analyzing, and correlating data that is contrary to accepted natural resource economics canon. Nonetheless, this study was, at times, difficult to comprehend, and its authors seemingly took it for granted that all readers are somewhat familiar with their statistical methods of data analysis. Moreover, the researchers, albeit thorough, tried to account for a tremendously-large aggregate of data, which, doubtless, confounded their results and subsequent conclusions. The researchers, seemingly, attempted to control for the effects of too many variables, and their methodology was confusing, to say the least. According to Wright (1921), correlation does not imply causation (Wright, 460). Moreover, an inordinate number of correlative data tasks the mathematical capability of calculating the degree of correlation (Wright, 461). Doubtless, both researchers deserve accolades for their efforts in establishing a relationship between selected countries' natural resource abundance and economic growth, a study that required an immense amount of work. Indeed, it was an honor to read this work.
References:
Barbier, Edward. (2002) 'The Role of Natural Resources in Economic Development,' University of Adelaide, Center for Economic Studies
Sachs, Jeffrey D., and Warner, Andrew M. (1997) 'Natural Resource Abundance and Economic Growth,' Harvard Institute for International Development
The World Bank. (2011) The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium. Washington, D.C.:The International Bank for Reconstruction and Development
Wright, Sewall. (1921). 'Correlation and Causation.' Journal of Agricultural Research20, 557- 585
