Is Norway's Resource Wealth Management Sustainable in the Long Run? A Comparative Study of the Scandinavian Countries

Abstract

The discovery of natural resources can turn out to be a curse rather than a blessing, as resource-rich countries tend to grow at a slower pace. However, Norway is considered an exception. This article conducts a structural break analysis in GDP growth to test for the presence of a curse by comparing Norway to Denmark and Sweden. We find that there are no signs of a deceleration in Norway by looking at GDP growth. This perspective is very limited as GDP does not provide a clear interpretation of economic growth. As such, we broaden the analysis by studying variables of sustainability and wealth management, using the same empirical framework. The findings for sustainability suggest a decline in early 2010s, even if GDP growth is on a positive trajectory. This seem to coincide with movements in the oil price. On the other hand, our tests indicate that the wealth management in Norway might be unpredictable, thus violating principles of consumption smoothing. By going beyond the limitations of GDP, Norway seem to develop towards an unsustainable path, and opening the possibility of a resource curse.