Why do resource-abundant economies grow more slowly?

Abstract

This article suggests an alternative explanation for why resource-rich economies have lower growth rates: because thev are likely to be living beyond their means. It is shown that overshootmg the steady state s equilibrium consumption and investment can be optimal in a Ramsey growth mode, with natural resources. Therefore, the economy will converse to its steady state from above, displaying negative growth rates on the transition. A dynamic general equilibrium model is calibrated to the Venezuelan economy and shown to approbate the economy s performance over the oil boom years adequately.