Inequality, Economic Growth and Nonrenewable Resources contribute to future economic growth and the pace at which inequality has increased over time. According to Barbier (2015), environmental degradation and the widening gap between the world’s rich and poor are symptomatic of gradually intensifying structural imbalances in how natural capital is used to create economic wealth and how that wealth is distributed. On the one hand, natural capital is undervalued and thus overexploited, while on the other hand the human capital stock is insufficient to meet demand, which drives rising income inequality. This structural imbalance between natural and human capital creates obstacles to innovation, growth and prosperity.

Gill et al. (2014) focus on the use of natural resources in Eurasia, demonstrating that the region has benefited from its natural wealth through rising income levels and improvements in living standards. Inequality, however, has also increased over time and across countries, yet it remains lower than in most parts of the developing world, especially Latin America. Alessandrini and Buccellato (2009) find a significant positive relationship between income inequality and economic dependence on natural resources. This link is especially strong for mining commodities and exports that are not used in domestic value chains. These conditions are associated with a dramatic increase in household-level inequality, since only a few households typically control resource revenues.

Fum and Hodler (2010) focus on the political-economy aspects of resource management and income inequality. They present empirical evidence that ethnic polarization increases the probability that a large stock of natural resources will correlate with inequality. Bourguignon and Morrisson (1990) find that mineral resource endowments, rather than other variables such as GDP, are an important determinant of the income distribution. Taking a microeconomic perspective, Loayza, Teran and Rigolini (2013) find strong evidence of spatially dependent inequality outcomes. Households located in physical proximity to mining districts in Peru tend to experience the largest gains in living standards, consumptions and literacy, while consumption inequality increases in all districts of a resource-producing province.

Although many empirical studies have investigated the link between natural capital, growth and inequality, very limited research is available on how all three factors interact. Moreover, much of the existing literature on the subject fails to adequately account for the role of wealth stocks. A thorough review of the literature would seem to indicate that the quantitative relationship between the exploitation of natural resources, economic growth and income inequality has been studied only by Gylfason and Zoega (2002) and Alessandrini and Buccellato (2009).

The following analysis tests the existence of a relationship between the dependence on nonrenewable natural resources (hereafter dependence) and per capita income and income inequality. The analysis is conducted in the spirit of Sachs and Warner (1995; 2001) and uses panel data for 43 countries for which data is available from 1980 to 2012 to examine, under different specifications, a system of two equations in which the dependent variables are per capita GDP and the Gini index and the independent variable is the dependence on nonrenewable natural resources. While Gylfason and Zoega (2002) and Alessandrini and Buccellato (2009) use a recursive model and focus on crosssectional data, this analysis attempts to account for the endogeneity problem generated 3