Resources, technology, and mineral trade in the economic growth of Namibia

Abstract

In traditional growth theory, the terms of trade are important growth factors. However, the new exported growth hypothesis suggests that shifting from resource to innovation rents via the free market trade mechanism accelerates growth. Given its revealed comparative advantages in natural resources, Namibia is attempting to apply World Bank, and UNIDO new growth criteria to stimulate economic growth. This research analyzes Namibia's data from 1968-1992, estimates the impacts and tests the significance of resources, technology, and mineral exports in economic growth. It assumes variable elasticity of substitution (VES) production technologies in which capital, labor, and land inputs can be disaggregated and hypotheses concerning scale, complementary and substitute inputs can be examined. A disaggregated examination of traded and nontraded sectors is employed over two sub-periods: 1968-1980, and 1981-1992. The analysis confirms the importance of mineral exports to the economy but finds no discernible sign of accelerated growth as a function of the shifting structure and the new growth criteria. The attempt to shift from resource rents in the early period to an industrial emphasis in the later period fails to accelerate Namibia's growth. Global constant returns to scale pre-1980, and diminishing returns to scale post-1980 obtain. The switch from complementary and flexible substitute inputs pre-1980 to rigid substitutes post-1980 suggests technical inefficiencies. The vent-for-surplus nature of the mineral subsector is supported; but attempts to industrialize via manufacturing are not vindicated, and the surplus arising pre-1980 dissapates post-1980, as evidenced by the low or negative factor productivities and technical change. The result is that neither the expected growth nor acceleration in technical change patterns are observed. Policies seem to have discouraged investment in the traded resource sectors such that structural changes expanded the low productivity nontraded service sectors. Namibia is a vent-for-surplus example in which resource rents do not sustain early economic growth, and attempts to shift to innovation rents fail to stimulate growth. Given the paucity of data, Namibia's case confirms that export surpluses from resources may be a necessary element, but not a sufficient condition, for sustainable growth.