Economic complexity, natural resources and economic progress in the era of sustainable development: Findings in the context of resource deployment challenges

Abstract

In recent years discussion on natural resource curse goes beyond the growth measure to incorporate other development measures of which economic complexity forms a major part. To gauge how natural resource exploitation is determined, researchers and policy makers explore the major determinants of resource curse. Surprisingly, the discussion on the role of economic sophistication in impacting natural resources continues to be scant. Against the backdrop of the perceived gap, this study explores the association between economic complexity and natural resources. This study used linear and non-linear model specifications to explore the impact of economic complexity (ECI) on the natural resource utilization (mineral resources) for ten Newly Industrialized Countries (NICS). In addition to economic complexity, economic growth, human capital, foreign direct investment, and population density were used as control variables in this study. We hypothesize that the relationship between ECI and natural resource rent may have an inverted’ U′ shape, depending on the technological sophistication and complexity of the economic processes. The panel data spans the years 1975–2020. Novel estimation techniques, including cross-sectional dependence tests, panel unit root tests, and cointegration tests, were used in this study. To achieve robust inferences, the long-run estimation was performed using panel Quantile regression, pooled OLS, and System GMM. The research findings support the existence of the inverted ‘U' shaped across natural resource rent and economic complexity. The Dumitrescu and Hurlin, panel causality tests confirm bidirectional causality links across economic complexity and rent on natural resources, mineral resources, human capital, and population density. These findings urge policymakers to recommend comprehensive economic and natural resource deployment policies to achieve sustainability.