RENT, INCOME, AND TRADE: DOES TRADE MITIGATE THE NEGATIVE EFFECTS OF OIL RENTS ON ECONOMIC GROWTH IN OIL-EXPORTING COUNTRIES?

Abstract

The present study investigates the relationship among oil rent, trade openness, and economic growth, and assesses the potential moderating role of trade openness in mitigating the adverse impacts of oil rents on economic growth. Dynamic panel data analyses were conducted on a sample of oil-producing countries spanning the period from 1990 to 2020. The study accounted for both cross-sectional fixed and time fixed effects. The findings of our study indicate that the presence of oil rent has an adverse impact on the growth of the economy. However, the degree of trade openness plays a moderating role in this relationship, resulting in increased rates of economic growth. The findings indicate that trade liberalization can function as a mechanism to diversify economies from dependence on oil rents and foster sustainable economic growth. The results of our study hold significant implications for policymakers in oil-producing nations who aim to attain sustainable economic growth and advancement.