Abstract
Natural resources serve as useful inputs and vital raw materials for domestic industries, which stimulate and secure sustained economic growth and development. However, the notion that the richness of natural resources can be translated into a curse rather than a blessing has long been an overarching topic of research for both academics and policymakers. Natural resources wealth has noticeable socioeconomic and political impacts that vary among resource-rich countries. Given the importance of the Gulf Countries and their dependency on income from natural resources, this study examines the economic impacts of natural resource dependency by taking per capita GDP and Total Factor Productivity as dependent variables. This study applied the Autoregressive Distributed Lag and Error Correction Model by using time-series data from 1984 to 2014. The results indicate that, in the long-run, dependency on natural resources has a positive impact on per capita GDP in Saudi Arabia and United Arab Emirates, but the relationship is insignificant in Kuwait. Then, it is found that natural resource dependency shows a positive impact on TFP in Saudi Arabia and a negative impact in Kuwait, while the relationship is insignificant in the case of United Arab Emirates.
Highlights
Several countries in the Middle East and North Africa are blessed with non-renewable natural resources, and yet they show low levels of productivity and poor development outcomes and economic growth when compared with resource-poor countries, such as East Asian economies (Oyinlola et al, 2015; Arezki and Nabli, 2012; Frankel, 2012)
Results in the kingdom of Saudi Arabia The short-run results show that current resource rents (% of GDP) have no effect on per capita GDP (PGDP), but the first lag is statistically significant for PGDP, with a negative effect of 0.08% per 1% increase in the 1-year lag of resource rents
It is observed that human capital in both its level and lag form is positively significant, and its long-run effect is remarkably high: with a 1% increase in human capital, total factor productivity (TFP) increases by 0.36%, 0.13%, and 0.56%, respectively
Summary
Several countries in the Middle East and North Africa are blessed with non-renewable natural resources, and yet they show low levels of productivity and poor development outcomes and economic growth when compared with resource-poor countries, such as East Asian economies (Oyinlola et al, 2015; Arezki and Nabli, 2012; Frankel, 2012). This condition is known as the “natural resource curse” (Auty, 1993), which encompasses a set of social, economic, and political challenges that are unique to countries that are rich in oil, gas, and minerals (Ross, 2015). This concept was simplified by Sachs and Warner (2001), who characterized it as the process in which natural resources crowd out growth-enhancing economic activities
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