Natural resource abundance can have a negative impact on the growth of an economy. An increase in natural resources leads to a movement of labor from the other sectors of the economy to the natural resource sector. However, once the increase subsides, the labor cannot easily move from the resource sector. The cost of training and time make the movement back to the other sectors harder for the workers in the resource sector. This paper contributes to the literature by developing an economic model that explores the effects of an increase in the natural resource sector output on the overall economy. Labor is divided into skilled and unskilled labor. The model predicts that overall output suffers from a positive shock in the resource sector. Empirical analysis is performed using time series and Vector Autoregression models and data from Nigeria. Time series results reveal that natural resource abundance has had a negative impact on the growth of Nigeria. Results of the Vector Autoregression model show that a shock in the natural resource sector causes a decline in the real GDP in the first few time periods following the shock.
Ruzvidzo, Rutendo, "The Gift That Keeps on Taking: Modelling the Impact of a Natural Resource Shock on an Economy" (2013). Senior Independent Study Theses. Paper 795.
Bachelor of Arts
Senior Independent Study Thesis
© Copyright 2013 Rutendo Ruzvidzo