April 15, 2003
Statistics on Oil Reserves by Income

See exciting commentary below.







Oil Reserves




Total Pop

This group

Top 10%





Sec 10%





Third 10%










Top Third





Sec Third





Bott Third





So here are the numbers on oil reserves, as promised. I have grouped countries by their GDP/capita (income). Because the world income distribution is highly skewed, I have grouped countries in the following way: approximately top 10%, second 10%, third 10%; these are combined into a group called the "top third" -- which contains about 1/3 of the world's population. I also look at the second third and the third third.

Which countries are in these groups? The top (approximately) 10% of countries include the US, many countries and Europe, and also Kuwait. The second 10% contains most of OPEC, which is why oil reserves are so high for that group, but also countains other parts of Europe, Taiwan, and some of Latin America. The richest country in the third 10% is Poland, and the poorest is Paraguay. The Middle group is dominated by China, but also includes some sub-saharan African countries. At the bottom are India, Vietnam and other countries.

As you can see, countries with a lot of oil reserves tend to be richer. This is no big surprise, of course, except to strange economists with wacky theories! See my previous blog, but to recap: These wacky economists and their "I ate a brain tumor for breakfast" friends at the Boston Globe argue, I suppose, that the OPEC countries in the second 10% would be in the top 10% if they just didn't have the easy money from oil. Does anybody out there believe this?? I find it hard to believe. I suspect without the oil, the middle east might look a lot more like sub-saharan africa than America or Japan. Besides, if these economists are right, then the obvious policy implication for the middle east is that we should destroy all their oil wells, which would make everybody better off, right? Saddam's were doing the right thing by buring the oil wells! And the EVIL US tried to stop him.

Data Compiled from:
Oil Reserves: U.S. Geological Survey and Oil and Gas Journal estimates
Population Data: Census Bureau
Income Data: www.geographic.org

Also, thanks to my brother Caru Grasshopper (TM) for finding the oil reserves numbers.

Posted by ethan at 12:48 PM
April 13, 2003
Resources and Growth

A recent article in the Boston Globe argues that middle eastern countries have faired poorly because of the easy money they get from oil makes them complacent about development, and even cite famous economists who believe it. But it's not true.

It's hard to see, even on the face of it, why having no resources could be an advantage. Suppose you are a poor country with few resources. Much of your income will be spent on basic necessities, leaving little for investment in development, so you are likely to stay poor. With some exportable resource, you have export earnings with which to finance development. In fact this is the path that a great number of economies have taken and are taking: they start by selling raw goods or agricultural products, then use the export earnings to develop low-skill manufacturing and then move on to higher value added products and services. This process is much harder if you don't have a local income source for the early stages of development.

The evidence is also against it. For openers, the US is a major counterexample. There is much careful empirical work demonstrating that the USs vast natural resources were a huge benefit to its growth over the past two centuries. (In particular, the US has vast oil reserves, but has a variety of other resources.) Norway is another counterexample. The example of the development of Japan and Korea are sometimes held out as examples of how development occurs better without resources. In fact, these countries are the exception rather than the rule. In general, countries with greater oil reserves, or with greater amounts of other resources tend to be richer than other countries without them. In my next blog I will provide some basic statistics to support this.

Posted by ethan at 12:07 PM