Abstract
The problem of the relevance of human and natural capital, as well as the potential adverse effect of natural capital on economic growth, has gained increased attention in development economics. The aim of this paper is to assess, theoretically and empirically, the relevance of several forms of capital on economic growth in certain small economies that are dependent upon tourism or natural resources. The empirical framework is based on Impulse Response Functions obtained from Vector Autoregressive models in which we focus on the model where economic growth is the dependent variable for ten small economies that are dependent upon either tourism or natural resources. We find that there is evidence of the “natural resource curse”, especially in the economies that have a strong dependence on resources that are easily substitutable and whose prices constantly fluctuate. We further find that in the majority of observed cases, the type of capital these small economies are most dependent on for their economic growth causes negative impulses in the majority of the observed periods. Therefore, the main policy recommendation should be to assure that even these small economies should strive towards further diversification and avoid dependence on only one segment of their economy.
Highlights
There is a well-known differentiation between different forms of capital: natural, financial, foreign, real, human, and social (Gylfason, 2006 [1])
The main goal of this study is to critically analyse the similarities and differences between the relevance of human capital and natural capital in small economies that are affected by the “natural resource curse” in comparison to countries that are dependent upon tourism as a source of revenue
The reason why we focus on these two specific equations is the research interest of this paper, which is determining the relationship between various forms of capital on economic growth, but we include the question of whether natural capital has a significant effect on human capital
Summary
There is a well-known differentiation between different forms of capital: natural, financial, foreign, real, human, and social (Gylfason, 2006 [1]). 1) on the other hand differentiates between five kinds of capital: financial, natural, produced, human, and social, stating: “All are stocks that have the capacity to produce flows of economically desirable outputs. The maintenance of all five kinds of capital is essential for the sustainability of economic development.”. All these forms of capital represent determinants of economic growth. Natural capital, according to Daly (1994 [5]), is the stock that yields a flow of natural services and tangible natural resources. He mentions fossil fuel reserves and populations of fish and trees. For Berkes and Folke (1994 [6]), natural capital consists of three major components: Economies 2017, 5, 6; doi:10.3390/economies5010006 www.mdpi.com/journal/economies
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
