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

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 em...

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Bibliographic Details
Published in:Sustainability 2022-03, Vol.14 (5), p.2797
Main Authors: Jolo, Abdulrahman M., Ari, Ibrahim, Koç, Muammer
Format: Article
Language:English
Subjects:
Competition
Diversification
Economic development
Economic diversification
Economic growth
Economics
Employment
Exports
Floating exchange rates
Foreign exchange rates
GDP
Gross Domestic Product
Growth rate
Human capital
Impact analysis
International trade
Labor force
Least squares method
Longitudinal studies
Macroeconomics
Natural resources
Rule of law
Statistical analysis
Structural stability
Sustainable development
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Summary: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.
ISSN:2071-1050
2071-1050
DOI:10.3390/su14052797