Does resource richness help in uplifting the economic status of resource‐abundant developing countries? Evidence from Organization of Petroleum Exporting Countries using method of moments quantile regression

Abstract

AbstractIt has been clearly shown that despite having an abundance of natural resources, several resource‐rich countries have experienced slower economic growth that makes it challenging for them to use these resources as a driver of growth. The relationship between economic growth and natural resources has remained an issue of debate over the decades. However, the question of natural resources being a curse or blessing for resource‐abundant economies is still unanswered and gathered the attention of many researchers. The goal of the present study is to provide fresh insights on the matter by estimating the relationship between economic growth, oil resources and natural resources in top oil‐rich Organization of Petroleum Exporting Countries (OPEC) over the 1990–2020 period. The augmented mean group (AMG) and recently introduced method of moments quantile regression (MMQR) are applied in the study for empirical estimation as the cross sectional dependence and slope heterogeneity are present in data series. The findings of both AMG and MMQR regressions show that oil resource richness does not contribute to uplifting the economic status of the studied countries. However, opposite findings are found for natural resources. Moreover, Granger causality analysis shows that unidirectional causal association is present between natural resources and economic growth but oil resources and economic growth have no causal relationship. It is concluded from the findings that the oil resources confirm the resource curse hypothesis, whereas natural resources confirm the resource bless hypothesis. The findings recommend the policymakers and government to enact adequate policies to connect rent‐based industries to other sectors and improvements in the financial sector to make an avenue for rents to effect economic growth. Most importantly, the government is recommended to pair these measures with anti‐corruption policies to ensure the sustainable use of the resources.