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Regional Analysis of Resource Curse Hypothesis: Evidence from Panel Data

Abdul Hannan* and Hasan Mohsin ()

Pakistan Journal of Applied Economics, 2015, vol. 25, issue 1, 45-66

Abstract: Natural resources are generally considered to be very important for development of any country. Sachs and Warner (1995) empirical study initiated a new debate in the field of economics that countries where natural resources are in abundance have slow growth than the countries which are resource deficient, called the resource curse hypothesis. Many studies have empirically tested this hypothesis and found mixed results. Most of the studies in literature have used primary products exports as a measure of resource abundance which is not very appropriate. This study extends the literature by using various proxies of resource abundance and has decomposed the total natural resource rent to oil, gas, and mineral rents. The study further includes various regions in the empirical analysis to find whether resource curse is region specific or not? Almost all possible channels of resource curse have been investigated. Empirical estimates by using panel data technique (within effect model) have also been provided. The results indicate that natural resources do not adversely affect economic growth directly in the large sample of 170 countries for the period 1991 to 2011. Regional analysis of resource curse hypothesis revealed that South Asia is the only region where resource curse exists with all types of resources because of low level of institutions. In all other regions, natural resource rents positively impact the economic growth.

Date: 2015
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