Revisiting oil consumption-economic growth nexus: Resource-curse and scarcity tales

Abstract

This study opens up a new insight into the link between energy (oil) consumption and economic growth by considering the influence of natural resources endowments. In order to account for heterogeneity and non-stationarity, the dynamic heterogeneous panel estimators within the framework of panel ARDL model are employed. Alternative estimators (AMG and panel threshold regression) are additionally used to check the sensitivity of the results to other long-run estimators and to account for threshold effect in the nexus.Findings from the baseline model reveal that economic growth of the resource-rich countries negatively responds to oil consumption in the long-run, although the short-run impact is positive. On the other hand, oil consumption fails to have significant effect on economic growth in both short-run and long-run in the resource-poor countries. The AMG estimator shows insignificance in all cases thus largely supporting the results of the baseline model. Amidst negligible instances of positive coefficients at certain threshold levels, the negative coefficients in most cases under the threshold regression model still suggest that oil consumption poorly affects growth in both country groups. Based on these findings therefore, the resource-rich countries are said to be faced with the problem of resource curse, while the resource-poor countries are challenged with scarcity of the energy resources.