EconPapers    
Economics at your fingertips  
 

Resource rents, economic growth, and the role of institutional quality: A panel threshold analysis

Mohamued Elyas Abdulahi, Yang Shu and Muhammad Asif Khan

Resources Policy, 2019, vol. 61, issue C, 293-303

Abstract: This study uses rule of law (i.e., institutional quality; IQ) as a threshold variable and revisits the nonlinear relationship between natural resource rent and economic growth under the resource curse hypothesis. The research utilizes the panel data of 14 resource-rich countries of sub-Saharan Africa (SSA) to identify possible threshold level(s) and to assess the effects using conventional OLS standard error and White-correlated standard error models. The empirical results confirm the existence of two significant threshold effects, indicating a positive relationship between resource rent and economic growth when a country's IQ is above the threshold level of −1.28 and within the range −1.28 to −1.37. However, below the threshold level of −1.37, the resource curse starts to operate, impeding economic growth. The results are robust under the alternative specification of system generalized methods of moment (GMM). Therefore, in contrast to linear and exogenous threshold estimations, this paper shows the required IQ threshold levels for SSA resource-rich countries where they can ensure economic growth using their natural resource windfalls. Failing to account for the endogenous nonlinearities may conceal both the required minimum threshold levels of countries to maintain economic growth and the dynamic effects of IQ. Thus, we recommend policymakers and researchers consider the pivotal role of the threshold effects of IQ to allow for sustainable economic growth.

Keywords: P48; O47; E02; O43; O13; Resource rent; Economic growth; Resource curse; Rule of law; Resource-rich; Threshold (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420718302290
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:61:y:2019:i:c:p:293-303

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-07-27
Handle: RePEc:eee:jrpoli:v:61:y:2019:i:c:p:293-303