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

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.