Investigating the oil curse in OECD and Non-OECD oil-exporting economies using green measures of income

Abstract

Empirical studies investigating the natural resource curse theory mostly employ cross-country and panel regression techniques subject to endogeneity bias. Also, most of these studies employ GDP in its aggregate or per-capita terms as the outcome variable in their analyses. However, the use of GDP measures of income for resource curse investigations may not portray the true incomes of resource-intensive economies. Standard national accounts treat natural resource rents as a positive contribution to income without adjusting for the value of depleted natural resource stock. This treatment often leads to a positive bias in the national income computations of resource-rich economies. Unlike previous studies, we test the robustness of the curse in the predominantly used measures of national income, GDP, by investigating the theme in genuine income measures of economic output as well. Also, the paper deviates from most empirical studies in the literature by using the Arellano–Bond difference GMM method in investigating the oil curse in OECD and Non-OECD oil-exporting economies. Additionally, we employ two alternative measures of resource intensity in our explorations; the share of oil rents in GDP and per-capita oil reserves. Our results provide evidence of the curse in Non-OECD countries employing aggregate and per-capita measures of genuine income.