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Growth, institutions and oil dependence: A buffered threshold panel approach

Yacine Belarbi, Fayçal Hamdi, Abderaouf Khalfi and Saïd Souam ()

Economic Modelling, 2021, vol. 99, issue C

Abstract: We examine the combined effects of oil dependence and the quality of institutions on economic growth. To do so, we introduce a new buffered threshold panel data model and apply it to 19 oil rent-dependent countries over the period 1996–2017. We show that the relationship between growth and oil-dependence is not linear. More precisely, three categories of oil-dependent countries are identified. Only countries with high-quality institutions are very stable. All the other countries have experienced a transition into a buffer zone and are potentially in a transition between two different regimes. When considering oil dependence as a threshold variable, it appears that the quality of institutions has a positive and significant effect on growth when dependence is either low or high. More interestingly, for countries with intermediate levels of oil-dependence, the quality of the institutions negatively impacts growth. Some of these countries have experienced something of an oil-dependence trap.

Keywords: Economic growth; Oil dependence; Quality of institutions; Buffered threshold panel data model; Nonlinear modelling of panel data (search for similar items in EconPapers)
Date: 2021
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Working Paper: Growth, institutions and oil dependence: a buffered threshold panel approach (2021)
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DOI: 10.1016/j.econmod.2021.02.018

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