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Does high indebtedness increase natural resource exploitation?

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  • Neumayer, Eric

Abstract

The debt-resource-hypothesis suggests that high indebtedness leads to increased natural resource exploitation as well as more unsustainable patterns of resource use. Countries with high debt burdens supposedly increase their extraction of fossil fuels and mineral resources as well as their production of so-called cash crops in order to service their debt obligations. In spite of its popularity, there have been few attempts to systematically test the hypothesis. Existing analyses refer to deforestation only and come to mixed results. This study fills a gap in testing the hypothesis more comprehensively for 23 natural resources and cash crops. It uses first differencing, period-specific time dummies, and a lagged dependent variable to mitigate omitted variable bias. No evidence is found that would support the debt-resource-hypothesis.
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Suggested Citation

  • Neumayer, Eric, 2005. "Does high indebtedness increase natural resource exploitation?," LSE Research Online Documents on Economics 16693, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:16693
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    File URL: http://eprints.lse.ac.uk/16693/
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    Cited by:

    1. Cockburn, John & Henseler, Martin & Maisonnave, Hélène & Tiberti, Luca, 2018. "Vulnerability and policy responses in the face of natural resource discoveries and climate change: introduction," Environment and Development Economics, Cambridge University Press, vol. 23(5), pages 517-526, October.
    2. SAUNGWEME, Talknice & ODHIAMBO, Nicholas M., 2018. "Public Debt Service And Economic Growth: A Survey Of International Literature," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 18(2), pages 129-142.
    3. Opschoor, J.B., 2007. "Environment and Poverty," ISS Working Papers - General Series 18757, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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