Curse or Blessing? An Empirical Re‐examination of Natural Resource‐Growth Nexus

Abstract

This study re‐examines the natural resource abundance‐growth nexus for a large sample of countries. Our findings indicate that total resource, coal, mineral, natural gas and oil rents have significantly positive effects on growth while forest rents have negative effects. While estimation results show that coal and mineral rents raise growth for resource poor countries, natural gas and oil rents (forest rents) raise (lower) growth for resource‐rich countries. Overall, our results fail to support the natural resource curse hypothesis. On the contrary, we can conclude that, except for forest rents, resource rents appear to be a blessing rather than a curse. Copyright © 2018 John Wiley & Sons, Ltd.

Role of natural resource abundance, international trade and financial development in the economic development of selected countries

“…Types of resources, whether point-source resources (such as minerals, ores and fuels) or diffuse resources (such as agriculture), also have a variegated effect on economic growth. Rents for oil, natural gas, mineral and coal promoted growth in a positive and significant way while forest rent had a significantly negative effect according to Yanikkaya and Turan (2018). This positive effect of mineral resources was also noted by Brunnschweiler (2008).…”

“…Quantifying the impact for 40 developing countries, Kim and Lin (2017) stated that a 10% increase in resource exports reduced income typically by 0.44-0.46%. Such instances of the negative effect of natural resources on economic growth experienced by resource-rich countries as compared to resource-poor countries have been termed the resource curse that was linked to non-renewable resources (Yanikkaya and Turan, 2018;Badeeb et al, 2017 andGerelmaa andKotani, 2016). Crowding-out and institutional effects were two streams outlined by Ahmed et al regarding the resource curse hypothesis.…”

“…The degree of economic development of countries can also result in a variable impact of natural resource abundance on economic growth. For their differentiation, Yanikkaya and Turan (2018) separated countries into developing and developed. For both developing and developed countries, natural gas, oil and coal rents exerted significantly positive effects on growth while forest rents gave a negative effect according to Yanikkaya and Turan.…”

“…In keeping with Law et al ( 2013), Decker and Lim (2008) and Dollar and Kraay (2003), the institutional quality variable contained the rule of law, government effectiveness and property rights. Like Yanikkaya and Turan (2018), Stijns (2006) and Atkinson and Hamilton (2003), natural resource rents were used as the proxy for natural resource abundance. Broad money was used as a proxy for financial development since it was a conventional measure of financial depth (Guru and Yadav, 2019;Ehigiamusoe and Lean, 2018;Hassan et al, 2011 andKing andLevine, 1993).…”

“…This research's findings thus provided additional support for the literature that argued natural resource abundance positively rather than negatively affected economic growth. It also highlighted the absence of any possible resource curse (as contended by Yanikkaya and Turan, 2018;Badeeb et al, 2017;Ahmed et al, 2016 andGerelmaa andKotani, 2016) and implied that the countries most likely had systems in place to ensure proper management of the natural resources to mitigate any negative effects.…”