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New Journal Article in Resources Policy

A new journal article authored by IEE-member Elkhan Richard Sadik-Zada,  has been published in Resources Policy

Resource rents, savings behavior, and scenarios of economic development

The paper revisits the nexus between natural resources and economic growth from the lens of the theory of economic development. It augments the traditional dual-sector economy model by the assumption that in addition to capitalists, also workers contribute to capital accumulation through private savings out of their wage income. The proposed differential game theory model of the interaction between the public and the elites identifies two realistic open-loop Nash and three Stackelberg scenarios for the management of the commodity-driven budget surplus. Based on the conventional transversality conditions, the model detects a progressing decay of social cohesion and institutional quality. It shows that at the early stages of the exploitation of natural resource riches, both the public and elites enable rather modernization-friendly scenarios. At the rather advanced stages of the exploitation of natural resources both groups try to maximize their short-term private benefits and by doing so protract or even inhibit the process of economic modernization. The study finds that the savings behavior of the workers has a positive modernization effect. Nevertheless, workers’ savings cannot fully offset the negative modernization effects of the inferior management of natural resource revenues.

Elkhan Richard Sadik-Zada, Resource rents, savings behavior, and scenarios of economic development, Resources Policy, Volume 81, 2023, 103258, ISSN 0301-4207,
https://doi.org/10.1016/j.resourpol.2022.103258.