The (non) effect of natural resource dependence on capital accumulation in Latin America

In a simultaneous model of human and physical capital accumulation for 17 Latin American countries from 1975 to 2004, we show that overall resource dependence is not significantly related to physical and human capital. Disaggregating the natural resource variable into subcategories, we find that petroleum export dependence is associated with higher physical capital and lower human capital, while agricultural export dependence is often associated with lower levels of physical capital. All of these effects are quantitatively small, however, casting doubt on the idea that natural resource dependence has stifled the accumulation of capital in the region. JEL Categories: O13, O15, O16 * We thank Kevin Grier for his comments and Josephine Huang for excellent research assistance. The paper has also benefited significantly from comments received at the American Economic Association meetings and the Public Choice meetings. Helpful comments were also provided by seminar participants at West Virginia University, George Mason University, and Duke University. Blanco: Assistant Professor at School of Public Policy-Pepperdine University, and Affiliate Researcher at RAND-CLASP, E-mail [email protected] Grier: Professor, Department of Economics, University of Oklahoma, corresponding author, Norman, OK 73019, Phone 405-325-0581, Fax 405-325-5842, E-mail: [email protected]