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Case study

This case study provides an overview of success and failure stories in macroeconomic management and natural resource management, exploring the impact of natural resources on economic growth and development. It examines countries such as Japan, Switzerland, Hong Kong, Singapore, Norway, Saudi Arabia, Botswana, Nigeria, Azerbaijan, Kazakhstan, and more. The study also discusses the challenges and pitfalls of resource dependence, and strategies for sustainable growth.

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Case study

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  1. Case study Thorvaldur Gylfason IMF Institute/Joint Vienna Institute Course on Macroeconomic Management and Natural Resource Management Vienna, 31 January - 11 February 2011

  2. overview • Stories, stories • Success stories without natural resources • Success stories with natural resources • Failures with and without natural resources

  3. success without resources • Japan • Stagnant since 1990 • Switzerland • Steady progress • Hong Kong • Singapore • City states • Cities are more efficient, and richer, than countries • But start with Gapminder: • Per capita GDP and life expectancy • Importance of social as well as economic indicators See gapminder.org

  4. Japan and switzerland Per capita GDP (2005 USD, ppp) Life expectancy (years)

  5. Hong kong and singapore Per capita GDP (2005 USD, ppp) Life expectancy (years)

  6. Mixed Success with resources • Norway, Saudi Arabia, and Algeria • Also, Norway vs. Iceland • Botswana, Congo, and Sierra Leone • Also, Botswana vs. Gabon, plus Nigeria • Further, Nigeria vs. Ghana • Azerbaijan, Kasakhstan, Russia, and Turkmenistan • Malaysia and Singapore • Mauritius, Costa Rica, and Fiji • Also, Mauritius vs. Madagascar • Chile and Zambia • Mexico and Venezuela

  7. Failures or mixed successes with resources: long list • African countries • Chad • Congo • Gabon • Guinea • Libya • Nigeria • Sierra Leone • Sudan • Others • Iran • Iraq • Saudi Arabia • Russia • Turkmenistan • Uzbekistan • Mexico • Venezuela

  8. Abundance vs. dependence Dependence hurts growth, even if abundance may help Hypothesis: Resource poor, resource dependent (Chad, Mali) Resource rich, resource dependent (OPEC) Resource dependence Resource poor, resource free (Jordan, Panama) Resource rich, resource free (Canada, USA) Resource abundance

  9. Economies blessed with abundant oil, minerals, or other natural resources should be able to invest the “rents” or proceeds at home, raising their growth potential. But the historical experience has most often been the reverse. The pitfalls are well known. Sometimes the state sells extraction rights too cheaply or taxes resource revenues too lightly. Sometimes the money it raises is stolen or squandered by rent-seeking elites and vested interests. When the money is invested, it is not always invested wisely or transparently. And by providing a ready source of foreign-exchange, natural resources can also reduce incentives for diversifying exports, a predicament known as “Dutch disease.” States will improve on this sorry historical record only if they capture an appropriate share of the resource rents; save a judicious amount overseas; and set clear, growth-oriented priorities for absorbing the remainder at home. commission on Growth and development report The Growth Report: Strategies for Sustained Growth and Inclusive Development, Commission on Growth and Development, The World Bank, 2008.

  10. Population drag and Resource depletion drag for constant K/Y for u = -gN

  11. Botswana and diamonds Average democracy index 1960-2008 Increase in life expectancy in years 1960-2008 4 7 -2 14 6 Real Per Capita GDP (2000 USD) Democracy

  12. Botswana and diamonds • Alternative measures of education • Primary enrolment • Not much variation • Secondary enrolment • Boys vs. girls • Tertiary enrolment • Expenditure on education • School life expectancy • Expected years of schooling • Inputs vs. output Education (secondary, %)

  13. Botswana and diamonds • There is another way to provide more and better and more evenly shared education to children • Produce fewer children to increase their average “quality” • Fertility is measured by births per woman Fertility

  14. Botswana and diamonds Ibrahim index • Measures delivery of public goods and services to citizens based on proxies for • Safety and Rule of Law • Participation and Human Rights • Sustainable Economic Opportunity • Human Development Governance (0 to 100)

  15. Botswana and diamonds • Corruption Perceptions Index measures perceived levels of public sector corruption in 178 countries • Based on survey interviews with business people • Each score is an average of several surveys Even so, Botswana has some distance to go More corruption Corruption (0 to 10)

  16. Botswana, gabon, and Nigeria Real Per Capita GDP (2000 USD) Democracy

  17. Botswana, gabon, and Nigeria Education (secondary, %) Fertility

  18. Botswana, gabon, and Nigeria Ibrahim index Again, Botswana has some distance to go More corruption Governance Corruption (from 10 to 0)

  19. Botswana, gabon, and Nigeria • Botswana has a much less equal distribution of income than Gabon and Nigeria • Gini index ranges from about 25 or so in Scandinavia (most equal) to over 60 in Botswana, Brazil, and South Africa (least equal) Gini index of inequality

  20. impressive record, yes, but Botswana is not perfect • Botswana has a much less equal distribution of income than Gabon and Nigeria • Same political party in power since independence in 1966, suggesting insufficient political diversification • Corruption is not a serious problem by African standards, but would be considered problematic by OECD standards • Unemployment is widespread • Was 40% 2003-2004, 24% 2005-2007, is now 7,5% (2008-2010)

  21. Chile and copper 22 3 -2 3 26 0 Real Per Capita GDP Democracy

  22. Chile and copper Education Fertility

  23. Chile and copper More corruption Education Corruption

  24. Mauritius and sugar 17 10 10 13 13 5 Real Per Capita GDP Democracy

  25. Mauritius and sugar Education Fertility

  26. Mauritius and sugar More corruption Education Corruption

  27. Azerbaijan, Kazakhstan, russia, and turkmenistan Oil and gas Per Capita GNI at PPP Democracy

  28. Azerbaijan, Kazakhstan, russia, and turkmenistan Oil and gas Per Capita GNI at PPP Manufactures (% of exports)

  29. Azerbaijan, Kazakhstan, russia, and turkmenistan Oil and gas Secondary education Fertility

  30. Azerbaijan, Kazakhstan, russia, and turkmenistan Oil and gas More corruption Life expectancy (years) Corruption

  31. Malaysia and singapore From 2.8 to 5.4 Real Per Capita GDP Life expectancy (Years)

  32. Malaysia and singapore From 3 to 3.5 Per Capita GNI at PPP Life expectancy

  33. Malaysia and singapore More corruption Democracy Corruption

  34. Malaysia and singapore Labor force with secondary education in Singapore up from 30% to 50% against 56% in Malaysia Education Fertility

  35. A Tale of two countries

  36. A Tale of two countries

  37. A Tale of two countries

  38. A Tale of two countries

  39. A Tale of two countries

  40. A Tale of two countries

  41. A Tale of two countries

  42. A Tale of two countries

  43. Another Tale of two countries

  44. Another Tale of two countries

  45. Another Tale of two countries

  46. Another Tale of two countries

  47. Another Tale of two countries

  48. Another Tale of two countries

  49. Another Tale of two countries

  50. Another Tale of two countries

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