Natural resource endowment and human development: Contemporary role of governance

Abstract

Natural resource abundance benefits a country, but the literature debates whether it is a blessing or a curse. Therefore, this study examines the influence of natural resources (NR) on human development (HDI) with the role of governance (GE). The study divided the 44 major NR exporting into i. oil, ii. natural gas, and iii. coal groups. The study employed data commencing 1990–2021, tested panel relationships using Westerlund panel co-integration, System-GMM, PCSE, and country-specific outcomes are tested using bootstrap causality procedure. In addition, the study introduced interaction terms that examined the influence of governance and resource rent on HDI. The results in panel settings reveal that oil and gas rents follow the resource blessing hypothesis while coal rents neutral hypotheses. Moreover, good governance has a more substantial impact on the HDI. On the other hand, the bootstrap causality outcomes reveal that results are more country-specific and observe the evidence of resource blessing, resource curse, and the neutral hypothesis. In sum, the impact of resource abundance varies across economies. Similarly, natural resources do not necessarily hamper human progress. However, poor governance can negatively impact HDI by not diverting the rents on the growth path. The results suggest a suitable policy for the better utilization of resource rents with good governance will lead to inclusive growth and human development.