Resource scarcity and innovation: Can poor countries attain endogenous growth?

Endogenous growth models have revived the debate over the role of technolog ical innovation in economic growth and development. The consensus view is t hat institutional and policy failures prevent poor countries from generatin g or using new technological ideas to reap greater economic opportunities. However, this view omits the important contribution of natural-resource deg radation and depletion to institutional instability. Rather than generating automatic market and innovation responses, worsening resource scarcities i n poor countries can lead to social conflicts and frictions that disrupt th e institutional and policy environment necessary for successful innovation, including appropriate market responses to scarcity. This indirect constrai nt of resource scarcity may help explain the disappointing growth performan ce of many poor countries.