Promovendus Karel Eckhorst

Resource Dependence and Economic Development

Karel Eckhorst studeerde algemene en ontwikkelingseconomie aan de Anton de Kom Universiteit van Suriname en het Erasmus International Institute of Social Studies.

Email: kareck@yahoo.com

It is obvious that a natural-resource-endowed developing country will depend a great deal on its natural richness, which can boost growth and development. It is much less obvious that at the same time such a country will face the challenges that are inherently linked to natural resource dependence. The contradiction lays in the fact, that despite the vast relative wealth, these countries deal with serious challenges regarding slow or stagnating economic growth and development, absent or low quality institutions, the crowding-out of sectors like manufacturing and agriculture and large foreign exchange influxes with increasing pressures on exchange rates. Conventional remedies like the isolated creation of strong institutions have proven not to establish the necessary transformation and transmission processes that create sustainable wealth from the unsustainable exploitation of natural resources. Therefore, the following central research question was setup: By what means are negative effects of natural resource dependence reversible in order to achieve conditions for economic development?

The ongoing depletion of non-renewable natural resources renders the diversification of such an economy inevitable. Two approaches are explored. The concept of sectoral integration or the (spontaneous) creation of backward and forward linkages supports diversification. The government has a role in facilitating linkages that were spontaneously created between the natural resource sector and other sectors within the economy. If the linkage does not arise spontaneously, governments can stimulate the creation of such linkages. Another approach focuses on the redistribution of resource revenues, which requires government economic policy. Both approaches can only take place in an environment of well-functioning institutions. The introduction and performance of these institutions require public sector reforms. This reform enables a situation that supports the suggested transformation.

The key objective of this research is to disclose mechanisms to reverse the negative effects of resource dependence. Issues like rent-seeking, linkage and integration, income/wealth distribution will be part of the desk-research. There will be a thorough data analysis to enable the setup of a time-series database, which will be used to construct an econometric model to simulate and forecast the impact of the reversal of the negative effects of resource dependence on economic development. Another dataset, in the form of a uses and sources table, will be build to investigate the current level of integration and linkages between economic sectors within the country.

This research is relevant, since it creates knowledge regarding processes in a multi-mineral endowed small economy that can successfully transform natural wealth into economic development. Redistribution policies will benefit from it in the course of equal income and wealth diffusion.