Non-Renewable Resource Booms and the Poor

Abstract

There are frequent suggestions that economies that specialize in mineral and energy extraction generate a type of growth that fails to concurrently benefit the poor. The dynamic effects creating this outcome could include increasing income inequality associated with extraction-led growth or Dutch Disease effects that inhibit poverty-reducing manufacturing employment. Others claim that resource extraction promotes poverty alleviation. No one, however, has directly examined the dynamics of resource extraction and the poor. This paper uses longitudinal data on income growth by quintile in 57 countries to statistically assess how the level of non-renewable resource extraction and changes in the level of extraction affects the poor. Our results indicate that at the national level there is nothing about extractive activity that overturns the adage that economic growth is concurrently good for the poor. If anything, a resource boom improves the likelihood that a growth spell will benefit the poor.