Natural Resources in Economic Development: Evolution of Theoretical Approaches

Abstract

This paper considers the evolution of the main theoretical approaches considering the role of natural resources in economic development in the XVIII-XXI centuries. The study revels three main functions of natural resources in the economy: a factor of production, a traded commodity and natural capital as a component of national wealth (along with real and human capital). It is shown that at the present stage globalization processes have determined the dominant function of natural resources as a tradable commodity. It is determined that if until the end of the XX century the presence of rich and diverse natural resources ensured economic growth, then in the subsequent period natural resources had a multidirectional impact on economic dynamics. The author performs a comparative analysis of three theories that take natural resources into account: neoclassical theory of economic growth, neoclassical theory of international trade and institutional theory. In the neoclassical theory of economic growth natural resources are considered as a factor of production, which act as determinants of economic growth. This theory formulates the Dasgupta – Heal – Solow – Stiglitz model, which defines the conditions for sustainable economic growth in an economy with non-renewable natural resources. In the neoclassical theory of international trade, natural resources are primarily considered as a tradable commodity, and the possibilities of development of the economy dominated by natural capital by increasing foreign trade rent are analyzed. Within the framework of this theory, three concepts explaining different channels of natural capital impact on the economy through the connection with foreign markets are formulated: the trap of raw material specialization, the Prebisch – Singer hypothesis and the Dutch disease. The macroeconomic causes of the resource curse are identified. Institutional theory studies the role of institutional conditions in the economic development of countries dominated by natural capital. Within the framework of this theory, it is shown that the quality of institutions determines the nature of the impact of natural resource surplus on the rate of economic growth; the resource curse is defined as a violation of incentives to accumulate different forms of capital; rent-seeking is one of the main channels of negative impact in conditions of weak institutions. All the theories considered allow us to conclude that the development of the economy based on the exploitation of natural resources is possible in the long term, provided that compensatory mechanisms are formed to ensure the transformation of natural capital into other forms of capital