Geopolitical risk and the sustainable utilization of natural resources: Evidence from developing countries

Abstract

Geopolitical risk has attracted global attention in recent years, as it becomes a threat to the sustainable utilization of natural resources. From the perspective of developing countries, this research explores how geopolitical risk impacts the level of natural resource utilization with panel data from 2001 to 2020. The empirical results first manifest that geopolitical risk leads to a significant reduction in the level of natural resource utilization. Second, heterogeneity analysis denotes that geopolitical risk exerts more significant impacts on developing countries with low-level science and technology, high-level openness, high-level economic growth, and high-level of natural resource abundance. This further reveals that the effect of geopolitical threats is more evident and the level concerning oil and forest resources are reduced more significantly. Third, the levels of economy and finance enhance the negative effect of geopolitical risk on natural resource utilization. Fourth, a non-linear correlation exists between geopolitical risk and natural resource utilization, which provides a broader perspective for the estimation of geopolitical risk's effects. Moreover, instrumental variable and several methods are conducted to boost the robustness of the basic conclusion. Finally, result-based policy recommendations are proposed for developing countries.