Natural resource rents and economic growth in the top resource-abundant countries: A PMG estimation

Abstract

The relationship between natural resource rents and economic growth has witnessed a lively debate since last decades. It has been shown that many countries rich in natural resources have experienced a disappointing economic growth. Still the key challenges how turning resource rents into a driver rather than a detriment of development. This paper contributes to the existing literature by focusing on the causal linkages between total natural resource rents and economic growth in a sample of top resource-abundant countries over the period 1970–2013. The implementation of the Pooled Mean Group (PMG) estimator reveals interesting findings. The latter give support for the natural resource bless hypothesis in the long-run, while no such evidence is confirmed in the short-run. Findings suggest also that economic growth exerts a positive impact on resource rents. On the other hand, the causality analysis indicates that a feedback causal relationship exists between the two variables. The short-run country-specific analysis shows the heterogeneity of results across countries, which constitutes an argument towards the use of the PMG estimator when investigating the resource rents-economic growth nexus.