Driving Factors of Economic Diversification in Resource-Rich Countries via Panel Data Evidence

Abdulrahman M. Jolo, Ibrahim Ari and Muammer Koç
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Abdulrahman M. Jolo: Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Qatar Foundation, Doha P.O. Box 5825, Qatar
Ibrahim Ari: Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Qatar Foundation, Doha P.O. Box 5825, Qatar
Muammer Koç: Division of Sustainable Development, College of Science and Engineering, Hamad bin Khalifa University, Qatar Foundation, Doha P.O. Box 5825, Qatar

Sustainability, 2022, vol. 14, issue 5, 1-14

Abstract: Economic diversification is an essential aspect of sustainable development as diversification enhances macroeconomic stability and promotes structural and long-term transformation not only in the economy but also in other pillars of development such as social institutions and dimensions. There is empirical evidence suggesting an impact of economic and structural factors on diversification. However, there is no consensus on the results in the literature because of various factors, such as the employment of different variables, methodologies, countries, and periods. This paper empirically explores the relations driving economic diversification in 14 resource-rich countries between 2001 and 2019, with six alternative models. In this regard, feasible generalized least squares regression was employed for the proposed model specifications. It provides strong evidence that gross capital formation, financial development, labor force participation, education, and the rule of law have statistically significant and positive impacts on economic diversification performance. On the other hand, inward foreign direct investment, real GDP growth, and self-employment rate also have statistically significant, but negative, impacts on economic diversification, probably because they further promote or are a result of resource-based growth rather than diversification into other technology- and knowledge-based sectors.

Keywords: economic diversification; export diversification; resource curse; resource-rich countries; sustainable economic development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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