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Although finding new frontiers or reserves of natural resources to exploit has been the basis of much of global economic development for the past 500 years, frontierbased development does not appear to be producing sustained high rates of growth in today's poorer economies. Through a two-sector model of frontier expansion and economic growth in a resource-dependent small open economy, this article demonstrates that such expansion will lead inevitably to a boom and bust pattern of longrun development, even if the economy's terms of trade or commodity prices remain unchanged. Initially, it is always optimal for the economy to choose the maximum rate of frontier expansion and thus ensure an immediate economic boom. However, an eventual economic decline is unavoidable. This result provides an alternative explanation of recent empirical evidence that resource-abundant developing countries display lower than expected long-run rates of growth. (JEL O13, O41, Q32, Q33)
ABBREVIATIONS
GDP: Gross Domestic Product
OLS: Ordinary Least Squares
I. INTRODUCTION
Finding new frontiers or reserves of natural resources to exploit has been the basis of much of global economic development for the past 500 years (Cipolla, 1976; di Telia, 1982; North and Thomas, 1973; Toynbee, 1978; Webb, 1964). Such frontier-based economic development is characterized by a pattern of capital investment, technological innovation, and social and economic institutions dependent on "opening up" new frontiers of natural resources once existing ones have been "closed" and exhausted (di Telia, 1982; Findlay, 1995; Findlay and Lundahl, 1994).
However, recognition of the role of the frontier in development has only occurred over the past century, beginning with the first frontier thesis on American development as put forward by Frederick Jackson Turner.1 Turner's frontier thesis was further extended by Walter Prescott Webb to explain not just American but global economic development over the 1500-1900 period of world history.2
In recent decades, historians, geographers, and social scientists have continued to modify the Turner-Webb frontier thesis to describe processes of frontier-based development in many areas of the world, including Latin America, Russia, Canada, South Africa, Australia, and New Zealand (Hennessy, 1978; Savage and Thompson, 1979; Wieczynski, 1976; Wolfskill and Palmer, 1983). Although there is considerable debate over whether the original thesis envisioned by Turner and Webb is still relevant for all frontier regions, there is...