Growth in an oil abundant economyThe case of Venezuela

Abstract

Venezuela's growth experience over the past fifty years has been characterized by a high economic growth rate during the period (1950-70), and a low economic growth rate in the last thirty years. Although Venezuela is an oil abundant economy, this growth experience is largely accounted for by the evolution of the real non-oil GDP. We use growth accounting to quantify to what extent the growth experience in the non-oil sector is due to physical capital accumulation and we find that whereas in the period 1950-1980 most of its growth experience is accounted for by the evolution of its TFP, this is not the case in the period 1980-1998. Nonetheless, the dynamics of the Venezuelan GDP is mainly driven by the non-oil GDP; the use of oil revenues by the Government may help to understand, at least in part, the growth experience of the non-oil sector of the venezuelan economy. Through the calculation of some correlations, we find that in quantitative terms the e.ect of the oil rents to physical capital accumulation is higher than its e.ect on the non-oil TFP. Finally, we have constructed a Ramsey-Cass-Koopmans model able to check the importance of Venezuelan public policies.