Can the Resource Curse for Well-Being Be Morphed into a Blessing? Investigating the Moderating Role of Environmental Quality, Governance, and Human Capital

Abstract

One of the most pressing global concerns is ensuring high levels of human well-being without overburdening natural resources. The impact of natural resource abundance on the economy’s monetary dimensions has long been controversial, with researchers debating whether it is a blessing or a curse. Recently, focus has shifted to its impact on non-monetary attributes (i.e., human well-being), with conflicting empirical evidence with respect to existence of the resource curse. However, studies on the indirect impact of natural resources on well-being are rare. This inquiry extends previous research by investigating the effect of natural resource abundance on human well-being and the underlying mechanisms that may clarify the convoluted link between the two variables in the UAE from 1990 to 2019. The novel contribution of this research is the evaluation of the resource curse concept from a broader perspective by considering how resource endowments indirectly affect human well-being via environmental quality, human capital, and governance channels. To this end, in the present study, we utilized the autoregressive distributed lag (ARDL) technique for cointegration and deployed the vector error correction model (VECM) for causality investigation. The ARDL results indicate cointegrated variables with diverse integration orders, signifying a long-term bond. Furthermore, the outcomes endorse the notion that resource endowment is inversely related to well-being as calibrated by the Human Development Index (HDI), corroborating the “Resource Curse Concept”, whereby large resource endowments impede human well-being. In terms of transmission channels, natural resources improve human well-being through environmental quality. In contrast, both human capital and governance have insignificant impacts on the influence of natural resources on well-being. Therefore, resource endowments improve human well-being as long as they do not harm the environment. The present analysis also resulted in the development of a feedback hypothesis between natural resource endowments and human well-being. The findings of this study provide several insights into the control of the direct and indirect adverse effects of natural resources on human well-being, the foremost being the provision of incentives for low-carbon energy use, reducing energy intensity, and assisting businesses engaged in R&D to minimize the cost of employing renewables, as well as investments in low-carbon technologies/cleantech and environmental technologies.