Growth, development and natural resources: New evidence using a heterogeneous panel analysis

Tiago Cavalcanti, Kamiar Mohaddes and Mehdi Raissi

The Quarterly Review of Economics and Finance, 2011, vol. 51, issue 4, 305-318

Abstract: This paper explores whether natural resource abundance is a curse or a blessing. To do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) impacts of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we explicitly recognize that there is a substantial cross-sectional dependence and cross-country heterogeneity in our sample, which covers 53 oil exporting and importing countries with very different historical and institutional backgrounds, and adopt the non-stationary panel methodologies developed by Pesaran (2006) and Pedroni (2000) for estimation. Our results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both income levels and economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.

Keywords: Growth models; Natural resource curse; Cointegration; Cross sectional dependence; Common correlated effects; Oil (search for similar items in EconPapers)
JEL-codes: C23 O13 O40 Q32 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (141)

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Working Paper: Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:51:y:2011:i:4:p:305-318

DOI: 10.1016/j.qref.2011.07.007

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