Mr Mahmud Suleiman, University of Surrey
The apparent notion that natural resource abundance leads to lower growth performance has attracted much attention in empirical literature. Most of these studies follow Sachs and Warner (1995) cross-sectional estimation technique. This paper therefore re-investigates the resource curse hypothesis in a panel data context using oil production and oil reserve as proxy of natural resource, in an effort to estimate the long and short-run effects of oil resource abundance on economic growth of 25 oil producing developing countries.
The countries are divided into three sub-groups to observe possible differences (if any) between group of countries that enjoy huge economic rent from crude oil export and other developing countries that are net importers of the product. Panel A constitutes a group of OPEC member countries, panel B is a group of other oil exporting developing counties that are not members of OPEC while panel C is a group of net oil importing developing countries.
In testing for the resource curse hypothesis, this work recognises there is substantial degree of heterogeneity in the growth experience of different resource abundant countries. Therefore, the recently developed panel unit-roots, panel cointegration and panel error correction models which takes heterogeneous country effect into account was utilized. This work also incorporates the `institutional quality’ variable in line with suggestion made by van-der Plogg (2011) that future empirical work on the resource curse hypothesis should allow for the role of institutions.
The estimation results reveals that oil abundance has a negative long-run (income) effect and a positive short-run (growth) effect on both the net oil exporting and net oil importing developing countries.
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