Natural resources, economic complexity and growth nexus: Role of digital governance in addressing the resource curse

Abstract

The nexus between natural resources and economic growth can be significantly influenced by digital governance. Effective digital governance enhances transparency and efficiency in managing natural resources, reducing the risks of mismanagement and corruption. This can lead to more sustainable economic growth and support economic diversification. Understanding these dynamics is essential for policymakers and researchers aiming for inclusive growth in resource-dependent economies. Therefore, this study explores the relationship between natural resources, economic complexity and economic growth of BRICS countries from 2003 to 2022. It also explores the moderating role of digital governance in realizing the relationship between resources and growth. The research utilizes the Method of Moments Quantile Regression, which accounts for non-linearity and addresses concerns related to slope heterogeneity. The findings reveal that natural resource rents adversely affect economic growth, with a significantly negative impact at the lowest quantiles, while digital governance fosters economic growth at the middle to highest quantiles. The moderating effects of natural resources and digital governance suggest that digital governance helps break the cycle of the resource curse. Countries can enhance the marginal contribution of resources towards growth by increasing the digitalization of their systems and processes. Additionally, economic complexity contributes to higher economic growth, with its impact gradually increasing from lower to upper quantiles. Policymakers should consider digital governance as an effective tool for sustainable development.