Revisiting the resource curse: Does volatility matter?

Yassine Kirat ()
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Yassine Kirat: Laboratoier d'Economie d'Orleans (LEO) & Labex VOLTAIRE

No 2019.NN, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: This paper analyzes the impacts of both natural-resource abundance and natural-resource volatility on economic growth. We apply the panel smooth transition regression (PSTR) approach of Gonzales et al. (2005), which is more flexible than the standard fixed-effects model, to data on 87 countries over the 1989-2015 period. Our results suggest that: (i) greater natural-resource abundance significantly raises economic growth, contrary to the resource-curse paradox; (ii) the impact of natural-resource abundance, investment and human capital on GDP growth rate per capita is non-linear, and varies by the level of natural-resource abundance volatility; and (iii) the subsequent GDP growth loss may reach 17 percentage points per year for countries with the highest natural-resource abundance volatility, compared to those with the lowest natural-resource abundance volatility. Volatility in natural-resource revenues and poor governmental responses then seem to drive the resource-curse paradox, instead of natural-resource abundance as such.

Keywords: Growth; resource curse; natural resources volatility; PSTR (search for similar items in EconPapers)
JEL-codes: C23 F43 O13 Q32 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2024-10
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https://faere.fr/pub/WorkingPapers/Kirat_FAERE_WP2024.07.pdf First version, 2019 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2024.07

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