Inclusion of Firm Heterogeneity in Resource Boom-Bust Cycle Literature
Neo-classical economists argue that a resource-rich country will outperform a country with low resources due to the given amount of natural capital, labour, physical capital, energy, materials, and other inputs while advocating a positive association between natural resources (minerals) and economic development. The United States, for example, is endowed with vast natural resources and, by exploiting its minerals, has become a dominant nation. However, Post-World War II critics such as Prebisch (1964) believe that the greater the concentration of primary product exports (including minerals), the lower the economic growth, and suggest adopting autarkic policies to promote the export of manufactured products rather than primary products. In the mid-to-late- 1980s, the Dutch disease in the Netherlands strengthened this argument by post-war critics, as many authors found little or no economic growth in many mineral-intensive countries over a longer period and coined the term 'resource curse' (Auty, 1993).