Exploring the influence of internal and external conflicts on the resource curse hypothesis in OECD countries

Abstract

Economic growth creates positive externalities for a country; therefore, worldwide governments attempt to attain them. However, the resource curse paradox impedes economic growth due to price volatility in natural resources. Political conflict is another inhibiting factor of GDP growth, and political conflict promotes the foundations of corruption in the nation, which affects natural resources to limit economic growth. This study explores the impact of natural resource abundance and political conflict on the economic growth in 32 OECD economies from 1990 to 2021. The study has adopted the moment method of quantile regression (MMQR) to evaluate the asymmetric interconnection between the variables. The empirical outcomes revealed that natural resource rents (NRR) are negatively associated with economic growth, while the effects are significant at lower and higher quantiles. Likewise, political conflict (internal and external conflict) reduces economic growth, in which the reduction effects of internal political conflict (external political conflict) are prominent at lower-middle (higher) quantiles. Henceforth, the study found that a resource curse exists in the panel of OECD, and political conflicts, either internal or external, further aggravate the problem. Based on the empirical results, the present work suggests measures to reduce natural resource volatility, increase political stability, enhance institutional quality, and make optimum use of resources to support economic growth.