
A new global economic diversification index
By Aathira Prasad, Director, Macroeconomics and Nasser Saidi, President, Nasser Saidi & Associates
“My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
Lewis Carroll, Alice in Wonderland
The well-known “natural resource curse” comes from the observation that economic growth in nations with an abundance of natural resources tends to be lower and more volatile. A number of empirical regularities characterise these countries: (a) resource-abundant countries tend to underperform their resource-poor counterparts, with evidence of a negative relationship between real GDP growth per capita and resource exports; (b) resource-based economies’ exposure to adverse external shocks leads to macroeconomic instability and higher economic risks; (c) non-resource based activities get crowded out; and (d) institutions tend to be weak and anarchic.
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