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Natural Resources and FDI in GCC Countries

Mohamed Elheddad
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Mohamed Elheddad: University of Hull, Hull Business School (HUBS), United Kingdom

International Journal of Business and Social Research, 2016, vol. 6, issue 7, 12-22

Abstract: Natural resources are a blessing for some countries to attract FDI but cursed for others. Existing literature argues the suggestion that resource-rich countries attract less FDI because of resource (oil) price volatility. This study examines that natural resources discourage FDI in GCC countries (the FDI-Natural resources curse hypothesis), using panel data analysis for six oil dependent countries during 1980-2013 and applying several econometrics techniques. The main findings of this paper is that natural resources measured by oil rents have a negative association with FDI inflows; this negative impact is robust even when other FDI determinates of FDI are included. FDI inflows decreased between 0.15 and 0.92% when oil rents increased by 1%. In addition, the empirical results show that trade openness and labour force are the main factors that encourage FDI, while political instability and corruption deter FDI inflows into GCC countries.

Keywords: Economic growth; endogeneity; FDI; GCC region; natural resources; panel data. (search for similar items in EconPapers)
JEL-codes: F21 Q33 Q35 C23 L72 O13 (search for similar items in EconPapers)
Date: 2016
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