Natural Resources of Economics

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Abstract

The journal, written by Corden and Peter in 1982, aimed at determining the aspects of structural change in open economies. The authors concentrated on the influence of natural resources to both developed and developing countries. Natural resources form the booming sector that contributes to the economic growth of the country. The article concentrated on the impact of de-industrialization by looking at the role of current technology in advancing older industries in Ireland, Switzerland, and Japan. The following paper provides a review of this article through analyzing the problems identified by authors, explaining the methods used to gather information and the authors’ main concluding remarks.

Introduction

Many empirical and theoretical studies have tried to investigate the phenomenon behind natural resources and their impact towards a country’s economy. Some scholars argue that natural resources are a curse because most resource-rich countries experience lower economic growth rates (Philippot, 2010). Max W. Corden and Peter J. Neary wrote about the booming sector and de-industrialization in a small open economy with the aim of exploring the nature of the general impacts towards de-industrialization. The authors based their analysis on areas where natural resources never exploited the cash from the nation but played a part in economic development. In addition, the article mentions about the effect of the current technology use in industries whereby technology has replaced human labor. The article concentrated on the short-term effects demonstrated through asymmetric growth because of resource allocation rather than long-term effects that cause depletion of natural resources.

The main problem(s)

The article addresses the impact of increased natural resources exploitation in the energy sector in terms of income distribution and growth of the manufacturing industry in terms of revenues generated from resource mining. According to the article, a boom occurs because of many reasons although it bases the argument on the improvement in technology. The article adopts a framework of an open economy producing goods purchased at exogenous global prices, and a non-traded good. The main traded goods identified in the article are energy and manufacturers while services forms the non-traded commodities (Corden & Neary, 1982). The article makes use of this framework because it played a major role in evaluating the outcome of the analysis through offering reliable and effective results. The authors made two key assumptions. Firstly, the models were assumed to be real, and any form of monetary consideration was ignored. The process dealt with real prices of goods identified. Secondly, only relative prices were determined, and the model gave no room for guess work. The analysis was conducted putting into consideration pre-boom equilibrium, influences of the boom on outputs, and effects of boom on the factor incomes (Corden & Neary, 1982).

Methods used to gather information

The article offers authors’ expertise in using frameworks and models in investigating a given phenomenon. The impact of natural resources towards the economy has been investigated by a number of researchers. Different methods are used by different people while trying to get to the root of the problem. Neary used the pure theory of international trade in establishing the effect of capital and labor towards development of the manufacturing sectors. The author borrowed a leaf from Corden and Peter in order to determine the relationship between natural resources and the micro-economy. Corden and Peter conducted their study in both developed and developing countries to determine sources of boom. Throughout the article, technology is used as the main source of boom and authors use it to gather information on industrial advancements in Japan, Switzerland, and Ireland (Corden & Neary, 1982).

On the other hand, natural resources management technologies have assisted in the improvement of the mining industries considering that industries can increase the productivity using the current technologies. Three main effects determine the level of resource use in the country. These are the amount of resources generated, the economic growth of the nation, and changes in income. Managi claimed that economic growth forms the central issues in the modern world and natural resources act as the main drivers to economic growth. Researchers focus more on people preferences and technology while analyzing long-run economic growth. In this article, the authors concentrated on the short-term economic growth through looking at the income and outputs. The article made use of these three factors in establishing the role of technology in natural resource exploitation during in the ancient periods. In addition, the article collected data from on energy prices to investigate the influence of the boom on people’s income and the resulting effect to the nation grid.

Conclusion

The following article is of great significance to the present economies because it provides countries with ideas on how to manage their natural resources. The article analyzed the problem of resource allocation, income distribution, and real exchange rates in traded goods. In conclusion, the article articulated that the boom promotes real appreciation because a rise in prices of non-traded goods leads to a real rise on the traded good (Corden & Neary, 1982). The results from this article demonstrate causes of de-industrialization. According to Rowthorn and Ramaswamy (1997), employment in most advanced technologies declined drastically from 1970 to 1994 because of the introduction of technologies that replaced human labor.

References

Corden, W. M., & Neary, J. P. (1982). Booming Sector and De-Industrialisation in a Small Open

Economy. The Economic Journal, 92(368), 825-848.

Managi, S. (2011). Technology, Natural Resources and Economic Growth: Improving the

Environment for a Greener Future. Edward Elgar Publishing Ltd, Cheltenham, UK.Neary, J. P., & Wijnbergen, S. v. (1986). Natural resources and the macroeconomy. Cambridge,

Mass.: MIT Press.

Philippot, L. (2010). Natural resources and economic development in transition economies.

Retrieved from

http://cerdi.org/uploads/sfCmsContent/html/323/Philippot.pdf

Rowthorn, B., & Ramaswamy, R. (1997). Deindustrialization its causes and implications.

Washington, D.C.: International Monetary Fund.