Natural resource curse and fiscal decentralization: Exploring the mediating role of green innovations and market regulations in G-20 economies

Abstract

Nations possessing a surplus of natural resources often encounter economic instability and political misconduct due to their significant dependence on the exportation of these commodities. On the other hand, it is argued by several academics that the phenomenon known as the “resource curse” can be alleviated by utilizing proficient governance, commitment to ethical standards, and adept resource management. The objective of the study is to analyze the impact of fiscal decentralization (FD) and natural resource rents (NRR) on mitigating the resource curse phenomenon in the G-20 countries. It explores the role of new technologies and market rules as mediators in this process. The fiscal decentralization, technological advances and market rules have potential to create sustainable environment for efficient resource use and sustainable development. Thus, current study is important to investigate these links. The present study utilizes structural equation models to examine the correlation between the NRR and FD concerning economic growth. The dataset utilized for the study encompasses data from the G-20 economies, covering the period from 1995 to 2022. The study’s findings suggest that nations exhibiting a significant expenditure decentralization level experience a more pronounced resource-blessing effect. Nevertheless, the impact of this phenomenon is mitigated by market rules and advancements in decentralized tax collecting and income distribution systems. The impact of FD on gross domestic product (GDP), particularly in the context of Expenditure decentralization (ED), is generally beneficial. However, it is important to note that regulations and innovations can adversely affect this relationship. The underlying rationale behind this assertion is that an increase in market regulations results in a corresponding proliferation of market rules, impeding economic progress. The findings presented demonstrate the intricate nature of the association between the NRR, FD, and the phenomenon of economic growth. Moreover, the research outcomes demonstrate the significance of achieving a harmonious equilibrium among these three components to facilitate sustainable growth.