Knowledge, natural resource abundance and economic development: Lessons from New Zealand 1861-1939

Abstract

We explore the role of knowledge accumulation in the economic development of a natural resource-rich country. New estimates of commodity output and patenting are used to show New Zealand's exceptionally high incomes before 1939 rested on a knowledge-led utilization of her economic landscape. By investigating the cointegrating and causal relationships among the output of 25 industries we show that a small number of leading industries formed development blocks. In turn most leading industries were driven by knowledge growth as reflected in patent statistics. Knowledge accumulation helped to transform the farming landscape and integrate farm and factory within a New Zealand system of mass production.