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Exploring the Nexus Between Oil Availability and Economic Growth: Insights from Non-Linear Model

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Abstract

The reemergence of the resource curse issue as a stylized fact in the economies during the past two decades is due to the negative link between the growth rate and the resources abundance. The objective of this survey is to examine the relationship between oil rents, institution quality, and growth by applying the panel smooth transition regression model for 12 oil-exporting countries during the period 1990–2015. Our insights recorded that the nexus between economic growth and oil rents is indeed non-linear. Through the use of non-linear modeling strategy, our empirical fact supported well the resource curse hypothesis. Also, we determine the threshold between the oil blessing regime and the oil curse regime. Indeed, the estimated slope parameter implies that the nexus between oil rents and economic growth smoothly switches one regime to another regime which is entirely smooth but relatively rapid. In fact, these countries are invited to improve the innovation in terms of good governance and the institutional tools to minimize the distortion and the ineffectiveness and channelize the resources revenue in an adequate way. Also, these countries should undertake oriented social policies to generate sustained growth path and minimize the adverse effect of oil abundance.

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Notes

  1. The RCH theory supposes that the resource-poor economies show a great performance path as the world’s star performers, while many resource-rich economies underwent adverse reactions in growth.

  2. According to Matsen and Torvik [41], the concept refers to the adverse effects on the traded sector when resources revenue pushes domestic demand up and adverse effects on economic growth after the reallocation production factors.

  3. The neglecting of the cross-section dependence generates biased estimates and misleading inference. This issue could be solved through the use of the non-linear CCE estimator which is derived by Omay and Kan [47] for the heterogeneous panel, Omay et al. [48] for the homogenous panel, and Omay et al. [49] for multi-regime homogenous panels.

  4. Is obtained based on the definition related to Paul [53], which it is a simple linear summation of the four series of rents (e.g., oil rents), multiplied it with GDP (oil rents are expressed as a share of GDP), and then divided it with the population.

  5. Several works modify conventional HDI by subtracting the GDP share from the formula. Thus, the MHDI does not include the income factor to eliminate multicollinearity problem in the regression analysis. MHDI will be presented as follows:

    HC=\( \frac{1}{2} \) ( Ggross enrolment + Llife expectancy)

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The author is very grateful to the Editor, Advisory Editor, and the anonymous referees for helpful comments and suggestions.

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    Sofien Tiba

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Tiba, S. Exploring the Nexus Between Oil Availability and Economic Growth: Insights from Non-Linear Model. Environ Model Assess 24, 691–702 (2019). https://doi.org/10.1007/s10666-019-09659-9

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