How does new demand for a natural resource impact the economic growth of developing countries endowed with it? Case study of lithium and rare earth elements

Details

Supervisors

Cassan, Guilhem

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

Nowadays, we are facing a new-technology era that is affecting the world economy. These new technologies use an extensive amount of natural resource. Consequently, we can ask ourself how the shift of demand from “old” to “new” natural resources (such as lithium and rare earth elements) can impact the economy of countries that are endowed with it. This thesis reviews the existing literature on natural resource impact (the blessing and the curse) and try to assess the demand increase in lithium and rare earth and their potential economic impacts on developing countries. To do so, we use a dynamic panel data with time-fixed-effects model. We discovered that extraction of lithium and rare earth elements has a positive impact on the GDP while it has a negative impact on consumption expenditures. In addition to this, we prove that the foreign direct investment is higher when countries are endowed with these “new” natural resources. Finally, when the price of lithium rises we observe that the growth is affected negatively due to the availability of substitutes.