Natural resources rents nexus with financial development in the presence of globalization: Is the “resource curse” exist or myth?

Natural resources may become a blessing that can contribute to societies’ welfare increases. Yet natural resource abundance could also become a curse for countries’ economic development. Numerous studies have investigated the relationship between natural resources and economic performance. However, the results remain ambiguous and have no consensus in the literature. In specific, most literature focused only on testing the curse’s existence, while studies that involve the role of financial development in mediating the nexus remain scarce. To the best of our knowledge, this is a pioneer study in a developing country endowed by natural resources. Using panel data of 33 provinces from 2012 to 2018, this study implements the Generalized Method of Moments (GMM) technique to examine the existence of the natural resource curse and scrutinize the role of financial development in mitigating the curse. Results show that Indonesia potentially experiences a natural resource curse. Nonetheless, the negative effect of natural resources on economic growth could be mitigated by enhancing the role of financial development to reach a certain threshold over economic output. This study recommends policymakers to not only increase financial development across the provinces but also pay more serious attention to other factors causing the natural resource curse in Indonesia.

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Popular Resource Sovereignty

10.1093/oso/9780190905651.003.0002 ◽

2018 ◽

Author(s):

Leif Wenar

Keyword(s):

Human Rights ◽

Natural Resources ◽

Large Scale ◽

Good Reason ◽

Resource Curse ◽

Civil Conflict ◽

Popular Sovereignty ◽

State Sovereignty ◽

The People ◽

Rich Countries

Article 1 of both of the major human rights covenants declares that the people of each country “shall freely dispose of their natural wealth and resources.” This chapter considers what conditions would have to hold for the people of a country to exercise this right—and why public accountability over natural resources is the only realistic solution to the “resource curse,” which makes resource-rich countries more prone to authoritarianism, civil conflict, and large-scale corruption. It also discusses why cosmopolitans, who have often been highly critical of prerogatives of state sovereignty, have good reason to endorse popular sovereignty over natural resources. Those who hope for more cosmopolitan institutions should see strengthening popular resource sovereignty as the most responsible path to achieving their own goals.

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Conclusion

10.1093/oso/9780198787174.003.0011 ◽

2017 ◽

Author(s):

Jonathon W. Moses ◽

Bjørn Letnes

Keyword(s):

Natural Resources ◽

Resource Curse ◽

Specific Model ◽

Dutch Disease ◽

Political Conditions

There is broad recognition that Norway manages its natural resources successfully. Policymakers are flocking to Norway to try to learn the lessons provided by the Norwegian model. This book describes the main challenges facing policymakers in resource-rich states (e.g., Dutch Disease, Resource Curse, Paradox of Plenty), and the sort of institutional solutions and policies that are available to them. We explain why the Norwegian authorities chose the solutions they did, and how these choices have changed over the years, in response to changing market and political conditions. The result is a book that offers insight and understanding as to why the country made the choices it did, rather than providing a specific model for export.

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Improving Relations between a State and a Business Enterprise in the Context of Counteracting Adverse Effects of the Resource Curse

Sustainability ◽

10.3390/su13031067 ◽

2021 ◽

Vol 13 (3) ◽

pp. 1067

Author(s):

Marek Szturo ◽

Bogdan Włodarczyk ◽

Alberto Burchi ◽

Ireneusz Miciuła ◽

Karolina Szturo

Keyword(s):

Economic Policy ◽

Natural Resources ◽

Resource Sharing ◽

Global Economy ◽

Empirical Studies ◽

Relevant Literature ◽

Resource Curse ◽

Mineral Resources ◽

Strategic Resources ◽

Key Resources

Natural resources play a significant role in the development of the global economy. This refers, in particular, to strategic fuel and mineral resources. Due to the limited supply of natural resources and the lack of substitutes for most of the key resources in the world, the competition for the access to strategic resources is a feature of the global economy. It would seem that the countries which are rich in resources, because of this huge demand, enjoy spectacular economic prosperity. However, the results of empirical studies have demonstrated what is known as the ‘resource curse’. This article concentrates on the characteristics of the paradox of plenty, and in particular on the possibilities of preventing this phenomenon. The aim of this article is to identify the measures of economic policy with which to counteract the resource curse, based on the relationship between the state and the extraction business. Upon the critical analysis of the relevant literature, we concluded that the state’s economic policy, implemented in cooperation with the extraction business, is increasingly important for the prevention of the resource curse. In the context of the resource curse, the optimal and most consensual instrument, in comparison with other resource sharing agreements, is a production sharing agreement (PSA), which should also be adjusted to the current local economic conditions in a given country.

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Natural Resources, Institutional Quality and Financial Development in GCC Member Countries: Visiting ‘Resource Curse Hypothesis’ by DCCE Estimation

Review of Economics and Development Studies ◽

10.47067/reads.v7i2.343 ◽

2021 ◽

Vol 7 (2) ◽

pp. 131-145

Author(s):

Muhammad Faheem ◽

Imran Sharif Chaudhry ◽

Sadam Hussain

Keyword(s):

Financial Development ◽

Natural Resource ◽

Structural Breaks ◽

Turning Point ◽

Resource Curse ◽

Institutional Quality ◽

Resource Rent ◽

Study Results ◽

Resource Hypothesis ◽

Natural Resource Rent

The main purpose of the study is to check whether natural resource rent affects the financial development or supporting the resource curse hypothesis by employing a recently developed estimation technique by Chudik and Pesaran (2015) from 1985 to 2017 in GCC member countries. The novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. The results of DCCE estimates are in support of the resource hypothesis that natural resource rent hurt financial development. Additionally, this study takes moderation of institutional quality to check the threshold point or turning point where the natural resource rent effect becomes positive. Our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. The study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in GCC member countries.

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Natural Resources and Economic Growth: The Role of Financial Development Evidence from MENA Region

SSRN Electronic Journal ◽

10.2139/ssrn.3925501 ◽

2021 ◽

Author(s):

Daouia Chebab ◽

Aishatu Ibrahim ◽

Mustafa Raza Rabbani

Keyword(s):

Economic Growth ◽

Natural Resources ◽

Financial Development ◽

Mena Region

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The “Resource Curse”: Lessons of the Third World

World Economy and International Relations ◽

10.20542/0131-2227-2015-1-28-39 ◽

2015 ◽

pp. 28-39

Author(s):

V. Shmat

Keyword(s):

Economic Growth ◽

Natural Resources ◽

Third World ◽

Raw Materials ◽

Resource Curse ◽

The Third ◽

National Institutions ◽

Resource Nationalism ◽

The Third World ◽

First World

According to the hypothesis known as the “resource curse”, natural resources abundance is a brake on economic growth of many Third World countries. But is it really so? The author believes there are deeper reasons why the Third World in general – regardless of the amount of raw material resources available in each country – cannot achieve the same level of welfare as the First World. The “resource curse” theory looks for the origins of the resourceful countries’ economic problems in the institutional sphere. But this seems misleading because of excessively narrow “here and now” approach. The economic and socio-political institutions of individual countries are regarded in short periods of time when “curse” declared itself. Its typical manifestations, such as rent-seeking, stagnation or degradation of the institutions, authoritarian power, snowballing public debt and symptoms of Dutch disease, were seen in many Third World countries long before the development of the major sources of raw materials and regardless of the availability or absence of them. Therefore, it seems appropriate to speak of a kind of “three-fold institutional curse” as an explanation of continuing underdevelopment of many countries and territories. Poor national institutions in the Third World countries are not actually caused by the presence or absence of concentrated natural resources. This is the result of prior historical development with series of discrete transitions from one condition to another: from colonial status – to independent statehood; from poverty – to unexpected wealth mostly based on the exploitation of the natural resources. Qualitative transformation of national institutions usually lags far behind. As a consequence, institutional development enters into a state of stagnation (inhibiting or destabilizing economic growth) that can stretch for very long periods of time. The author concludes that the presence or absence of resources, in fact, has no fundamental impact on the nature of socio-economic development of Third World countries. The major reason hindering institutional progress has external nature, that is heavy economic dependence on the First World (coupled with informal political subordination). This circumstance begets the “resource nationalism” by the developing countries – exporters of raw materials and fuel. History of “resource nationalism” provides a useful lesson for Russia whose economy is features by growing dependency on resources. Acknowledgement. The article has been supported by a grant of the Russian Science Foundation. Project № 14-18-02345.

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