Resource curse versus resource blessing: New evidence from resource capital data

Abstract

This study aims to investigate the association between natural capital and economic development using panel data comprising a large number of countries across the world for the period 1995–2018. The study accounts for several key drivers of economic development, such as the produced capital, human capital, trade and institutional quality indicators. Our findings demonstrate that the effect flowing from natural capital to economic performance is sizable and positive. The institutional indicators such as the control of corruption, rule of law and government effectiveness play an important role in driving economic growth positively. Overall, we reject the resource curse hypothesis and support the resource blessing hypothesis. The evidence also shows that the combined effect of institutions and resources is not a crucial factor in determining growth. These results are fairly consistent for both developing and developed economies. The study offers important policy implications and adds a new dimension to the empirical literature on the nexus between resource abundance and economic growth by using wealth and capital data.