Beyond the resource curse: The multifaceted impact of mineral resources, financial systems, and workforce competence

Abstract

This research provides a fresh perspective by examining the impact of natural resources and the financial development index on the economic growth of the USA from 1983 to 2021. It utilizes foreign direct investment (FDI) and the human capital index as control variables. Several methodological approaches were employed, including DF-GLS and ADF with breaks for unit root testing, Bayer-Hanck for long-run co-integration, and FMOLS, DOLS, and CCR to ascertain the long-run elasticities among the variables. Robustness checks were performed using various techniques, including least squares regression—with and without breaks—robust least squares and quantile regression as non-parametric methods. To determine the causality, Granger causality analysis was employed. Results identified stable differences in the variables, confirming long-run equilibrium. Principal findings suggest that natural resources positively and significantly impact long-term economic growth, underscoring the ‘resource blessing’ effect in the USA. Moreover, the financial development index was found to stimulate economic growth. Findings from control variables notably affirmed the economic growth in the USA. These outcomes remained consistent and valid across both parametric and non-parametric robustness checks. Causality analysis revealed that FDI, the financial development index, and total natural resources have an uni-directional effect on economic growth, while human capital has a bi-directional causality with economic growth. This study suggests policies to utilize natural resources in tangible sectors further, emphasizing the role of financial development, human capital enhancement, and FDI stimulation.