A Revisit To The Resource Curse Dilemma In The Mena Region, For 2008-2014

The interplay between oil rents, institution and economic growth is important for resource abundance economies as they are hypothesized to be suffering from 'resource curse', which denotes poor growth in the presence of abundant natural resource. The current paper aims to study the triptyc...

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Bibliographic Details
Published in:Applied Econometrics and International Development 2022-01, Vol.22 (1), p.81
Main Authors: Haque, Mohammad Imdadul, Faruk, Bashir Umar, Tausif, Mohammad Rumzi
Format: Article
Language:English
Subjects:
Diversification
Economic development
Economic growth
GDP
Generalized method of moments
Gross Domestic Product
Industrial production
Panel data
Per capita
Petroleum
Rents
Value
Value added
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Summary:The interplay between oil rents, institution and economic growth is important for resource abundance economies as they are hypothesized to be suffering from 'resource curse', which denotes poor growth in the presence of abundant natural resource. The current paper aims to study the triptych relationship between economic growth, oil rents and institutions with an added dimension of sectoral contribution to growth. The Middle East and North African (MENA) region is an archetypal case of resource abundant region. Both the pattern of economic growth and institutional quality in the region is diverse and debatable. This study bases itself on 18 countries of the MENA region for the period 2004 to 2018, using various static and dynamic panel data methods including Arellano-Bond-Generalized Method of Moments. The main findings indicate that oil rents and institutions determine economic growth. We estimate two models: A first model relating GDP per capita with the sectoral shares on real value added and a second model relating GDP per capita with sectoral real values per capita. In the first model, the negative and insignificant effects of agriculture share, manufacturing share and service sectors share on GDP might indicate the relative unimportance of these sectors in the economies accruing oil rents, indicating the presence of a resource curse. In the second model, the level of industrial production per capita, positively related with Oil rents per capita, shows a positive and significant effect on real value added of Sectors and GDP per capita. These results confirm that oil rents per capita is not a curse but an important positive advantage for economic development. An important highlight of the result that differentiates this study with others is the positive impact of institutions. The study negates the presence of resource curse as oil rents are contributing positively to growth and concludes with the note that poor performance of some sectors in some countries in the MENA region is not exactly due to the quality of institutions; rather it is because of lack of diversification.
ISSN:1578-4487