WITH EXHAUSTIBLE RESOURCES, CAN A DEVELOPING COUNTRY ESCAPE FROM THE POVERTY TRAP?
Cuong Le Van
19 August 2010
Growth and Exhaustible resources

The standard economic literature on growth and exhaustible resources was firstly discussed. In this context, a non renewable natural resource can be considered as a production factor.
Some key questions were posed, such as:

• Can ownership of a non-renewable resource allow a poor country to make the transition out of the poverty trap?
• On the contrary, will the existence of the natural resource, which makes it possible to consume without producing, destroy any incentive to accumulate?

The model was then set out, followed by an extension of the model. Some interesting findings include:

• That when the technology is good enough, the natural resource is a blessing allowing the economy to consume and accumulate;
• The natural resource can be a curse: the economy may optimally overshoot its steady state, and then has, during convergence, decreasing capital and consumption and a negative growth rate.