Impact of Financial Development and Resource Rents on Total Factor Productivity in Gulf Cooperation Council Countries

Abstract

The present study estimates the impact of financial development and resource rents on total factor productivity in the Gulf Cooperation Council (GCC) countries by applying the GMM approach. The study takes the panel data from 1984 through 2019, while keeping population, corruption, and trade openness as control variables. The results reveal that financial development and resource rents affect total factor productivity positively in GCC countries. Moreover, the results show that improving trade openness contributes positively to total factor productivity. Though, raising corruption and population deteriorate productivity. Thus, this study emphasizes on the need to improve the quality of political institutions to minimize corruption and encourage contraceptives to control the fertility rate for intergenerational sustainability. Further, there is a need to promote trade and financial integration with developed countries, and to efficiently utilize natural resource rents for long-term growth and development.