Institutional Quality and Curse Resources: An Experimental Study on OPEC Countries

Abstract

This paper is to study the resource curse applying annual data from 2002 to 2016 for the Organization of the Petroleum Exporting Countries (OPEC) members i.e. Algeria, Iran, Kuwait, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. For this purpose, there were concerned the interactions role of resource abundance and institution quality, and their marginal effect of the countries’ economic growth. Results show that resource abundance and investment have a positive significant effect on the economic growth. Yet, initial income level is observed to have a significant negative effect on the economic growth. In addition, the results showed that the positive effects of resource abundance in the OPEC countries were reduced with increasing institutional quality. The empirical results rejected the resource curse assumption for OPEC, because the effects of resource abundance on the economies of OPEC were significantly positive. Results of the present study indicated, since the institutional structure of these countries is based on oil, the lack of oil revenues in short-run can have a negative effect on their economies.