Natural Resource Rents Research Articles

Impacts of economic development, globalization, and gross capital formation on natural resources rents: Evidence from India

Natural resources are a country's wealth, and resources economics and policy literature has extensively researched how to utilize this richness as a determinant of the country's growth. However, the primary challenges reside in establishing economic development as a driver for natural resource rents. Given this context, this study explores the association between economic development, globalization, gross capital formation, and natural resources rents in India. For the empirical research, the study employed Dynamic Auto-Regressive Distributive Lag (DARDL) simulation and Kernel-based Regularized Least Squares (KRLS) approaches on yearly data from 1990 to 2020. The present research used a unit root test to ascertain the stationary state across all variables, establishing their long-term cointegration connection. Results suggest that capital formation and economic development positively impact rents derived from natural resources in India, while globalization negatively affects natural resources rents. Unidirectional causation of economic development, globalization, and gross capital creation to natural resources rents has been established in this study using the Toda-Yamamoto causality model. Our findings have important policy implications and support the idea that sustainable economic growth models inherently rely on factors like the efficient utilization of natural resources and globalization.

Links between technological innovation, financial efficiency and environmental quality using quantile regressions: The role of foreign direct investment, institutional quality and natural resources

Policymakers and academics are interested in identifying mechanisms that promote environmental sustainability due to their relationship with climate change. This research evaluates the channels that transmit the effect of technology and financial efficiency on environmental quality. The relationship is moderated by real production per capita, foreign direct investment, natural resource rents, and institutional quality in the context of the Environmental Kuznets Curve. The research covers the 1996–2021 period for a sample of 88 economies classified into three groups according to the World Bank Atlas Method. We use second-generation cointegration techniques with structural breaks and quantile regression models. The findings offer sufficient evidence to conclude that the impact of technology and financial efficiency on environmental quality is heterogeneous throughout the distribution. Our findings suggest that technology is more associated with maximizing production than mitigating or restoring environmental deterioration. A policy implication derived from our research is to encourage the generation of carbon-free technology and promote financial efficiency in upper-middle-income countries to achieve environmental sustainability.

Unpacking the environmental quality through the effects of natural resources, renewable energy consumption, banking development and industrial value addition: An empirical evidence from BRICS countries

This study explores the association between natural resources rent, industrial value addition, banking development, renewable energy consumption, total reserves and environmental quality in the dynamic context of BRICS nations from 1995 to 2019. BRICS economies are responsible for global greenhouse gas emissions and confront pressing environmental challenges, including biodiversity loss and pollution. For the dependent variable, the environmental quality, the study constructed a composite index using PCA for all environmental indicators where interdependencies among variables are prevalent. Besides this, the study incorporates two interaction terms to determine the indirect influence of natural resource rent and banking development on environmental quality through the mediating role of industrial value addition. By applying the CS-ARDL technique, the outcomes of the study reveal that natural resources rent, industrial value addition, and total reserves positively influence ENQ, indicating the adverse consequences of industrial sectors on environmental quality and continued environmental degradation due to resource-intensive industrial production, underscoring the urgency of sustainable resource management. In contrast, banking development and renewable energy consumption negatively influence ENQ, signifying the positive role of developed banking sectors in supporting eco-friendly projects and enhancing environmental quality. This study offers valuable insights for policy interventions to foster a more sustainable future.

Energy efficiency, economic growth, and natural resource rent: A trilemma analysis of environmental sustainability in Africa

Climate change, exacerbated by a global economic model reliant on carbon-intensive industrialization and unchecked growth, disproportionately affects vulnerable regions such as Africa. Therefore, transitioning to an ecologically sustainable development paradigm is imperative for developing countries facing climate disruptions. The current study analyzes the trilemma effect of energy efficiency, economic growth, and total natural resource rent on environmental quality in Africa from 2010 to 2018 using SMB-DEA and PMG ARDL methods. The results are as follows: first, SMB-DEA analysis found traditional and renewable energy efficiency at 89 % and 58 %, respectively, indicating infrastructure and policy deficiencies in optimizing renewables. Second, economic expansion poses significant environmental costs; energy efficiency has an insignificant ameliorating effect on efficiency; and counterintuitively, natural resource rents become less environmentally harmful over time, though remain detrimental in the short term. Third, country-specific analyses presented heterogeneous outcomes, reflecting the complexity of global climate solutions. Fourth, transforming inefficient energy-growth-emission systems onto sustainable trajectories requires 262 % CO2 emission cuts and 46.7 % increased renewables capacity to reach efficiency frontiers. Fifth, Bidirectional causal relationships exist between income, energy efficiency, emissions, and resource rents, mutually influencing one another. These findings support suggestions for upscaling green energy capacity and improving green energy efficiency.

Sovereign risk and Dutch disease

I study how, in the presence of default risk, the Dutch disease amplifies an inefficiency in the sectoral allocation of capital. In a sovereign default model with commodities and production of traded and non-traded goods, default incentives increase when more capital is allocated to non-traded production. Households do not internalize this, giving rise to an inefficiently large non-traded sector. Commodity windfalls amplify this inefficiency through the classic Dutch disease mechanism. I characterize state-contingent subsidies that implement the efficient allocation and compare them to a simpler subsidy rule that ameliorates the externality. Evidence from spreads, natural-resource rents, and sectoral investment data support the main findings of the model.

The Effect of Green Bonds on Natural Capital Protection: Worldwide Evidence

The continued destruction of nature, including the degradation of natural capital and biodiversity, threatens ecosystem services and human well-being. Natural capital is crucial for providing the conditions necessary for human survival and ecosystem services. Without protecting natural capital, this degradation will have lasting effects on current and future generations. Existing studies increasingly show that Green Bonds can finance environmental projects effectively, but few have examined their impact on natural capital protection. This study investigates the effect of Green Bonds on natural capital protection globally, using IMF Climate Data and World Bank data from 2019 to 2022. By applying the Green Investment theory and quantile-panel regression analysis, the results show that Green Bonds significantly enhance natural capital protection at the 25th and 50th percentiles. This indicates that countries can improve their natural capital protection through the issuance of Green Bonds. Moreover, the study finds that renewable energy positively correlates with natural capital protection, while population growth and total natural resource rents have negative impacts. Hence, this study recommends that governments prioritize the issuance of Green Bonds to fund environmental initiatives.

Cyclicality of public debt in developing countries: Does dependence on natural resources matter?

We revisit the resource curse theory, producing empirical evidence of the importance of natural resources on the cyclical orientation of public debt. Using the Driscoll-Kraay fixed-effects method and panel data from 51 developing countries for the period 1986 to 2020, we show that natural resource rents accentuate the procyclicality of public debt. However, our results suggest that the impact of natural resource endowment in procyclicality does not have the same magnitude when taking into account (i) the disaggregation of public debt, (ii) alternative measures of natural resource rent and (iii) the division of the sample into African and non-African countries. More specifically, natural resource rents amplify the procyclicality of external public debt more than domestic public debt. In addition, we find that while coal and forest rents have no effect on the cyclical orientation of public debt, mineral and especially oil rents do amplify the procyclical nature of public debt. Finally, our results show that the accentuation of the procyclical nature of public debt generated by the interaction between the economic cycle and natural resource endowment is more pronounced in African developing countries than in non-African developing countries. Our results shed new light on the Dutch disease hypothesis, and have relevant policy implications for governments in resource-rich countries wishing to move towards counter-cyclical fiscal interventions.

Natural resource rent's effect on Ethiopian inequality and manufacturing's moderating role: evidence from dynamic simulated ARDL model

Purpose The purpose of this study is to empirically examine the impact of natural resource rents on income inequality in Ethiopia from 1981 to 2022 and investigate whether investments in manufacturing moderate this relationship. Design/methodology/approach Dynamic autoregressive distributed lag simulation and Kernel-based regularized least squares (KRLS) models are used to analyses short- and long-run relationships, as well as the potential moderating role of manufacturing. Findings The bounds test indicates natural resource rents have a long-run positive effect on inequality but a short-run negative impact. The KRLS model finds manufacturing conditions for this linkage in the short run. In the long run, economic growth decreases inequality following an inverted Kuznets pattern, while government expenditures reduce disparities when directed at priority social services. Research limitations/implications The findings provide mixed support for theories while highlighting nuances not fully captured without local analyses. Strategic sectoral investments may help optimize outcomes from resource dependence. Practical implications The results imply Ethiopia should prudently govern resources, productively invest revenues and prioritize social spending to equitably manage industrialization and uphold stability. Social implications Reducing disparities through inclusive development aligned with empirical evidence could help Ethiopia sustain peace amid transformation and realize its goals of shared prosperity. Originality/value This study applies innovative econometrics to provide novel insights into Ethiopia's experience, resolving inconsistencies in the literature on relationships between key determinants and inequality.

The interactive effect of geopolitical risk and natural resource rent on political instability: Evidence from Ghana

AbstractBackgroundAccording to economists, political instability is regarded as a serious malaise harmful to economic development, which results in frequent switches of policies, creating instability to impede economic performance. The widespread political instability in many developing countries, along with its harmful effects on social welfare and economic performance, has heightened the interest of policymakers and economists in understanding the factors that contribute to political instability to inform better policy formulation. It is therefore imperative to examine the interactive effect of geopolitical risk and natural resource rent on political instability to provide strong empirical grounds for policy implementation.ObjectivesThis study employs a long time series dating from the period of 1824–2020 to examine how natural resource rent and geopolitical risk influence political instability in Ghana. First, we examine long‐run effects using linear methods. Second, we employ nonparametric methods to investigate the nonlinear link between natural resource rent and political instability as well as between geopolitical risk and political instability.MethodsThe study applied linear methods and nonparametric methods to historical time series data dating from the period of 1824–2020.ResultsThe results from the linear methods show that the interaction of natural resource rent and geopolitical risk exerts a positive and larger impact on political instability compared to their separate effects. The results from the nonparametric methods show a weak nonlinear link between these variables (i.e., natural resource rent, geopolitical risk, and political instability), although consistent with the linear long‐run results, the links are positive.ConclusionOverall, the results demonstrate that the observed positive relationship between natural resource rent and political instability is not just a recent phenomenon but holds for over more than 100 years in Ghana. Therefore, to attain a stable political environment, both long‐ and short‐term policies on political stability should be formulated.

Navigating the environmental impact of geopolitical risk and economic policy uncertainty: Evidence from load capacity curve hypothesis in BRICST economies

AbstractGlobal warming, climate disruptions, and environmental challenges are significant concerns in the present era, placing socioeconomic burdens on nations globally as humanity progresses at an unprecedented pace. In this framework, the load capacity factor (LCF) has evolved to demonstrate the environment‐damaging behavior of the population and nature's reaction to such damage. Thus, improving LCF by economies has become crucial for attaining the sustainable development goals (SDGs). In doing so, the current study scrutinizes the influence of geopolitical risk (GPR), economic policy uncertainty (EPU), economic growth (EG), renewable energy consumption (REC), natural resource rent (NRR), and financial development (FD) on LCF in BRICST economies during 1990–2020. We use the panel quantile regression (PQR) technique for empirical outcomes. The PQR technique can capture the heterogeneous role of explanatory factors. The empirical results of the PQR method validate the U‐shaped LCC hypothesis through the non‐linear evaluation of EG and LCF. Furthermore, results reveal that GPR, EPU, and FD adversely affect environmental quality. However, REC and NRR's supportive role in improving LCF is found. Keeping in view these empirical results, the study suggests an extensive policy framework for attaining the objectives of SDG 13 (climate change), SDG 08 (decent work and economic growth ), SDG 16 (peace for sustainable development), SDG 12 (responsible consumption and production), and SDG 07 (clean energy) in BRICST economies.

Capitalizing on natural resources rent and renewable energy in enhancing economic growth—New evidence with MMQR method

AbstractNatural resources are vital resources given by nature and are responsible for promoting a nation's economic development. However, with the existence of two opposing theories, it is essential to provide state‐of‐the‐art research that ascertains the association between natural resources and economic growth. The Rostow hypothesis presents the importance of natural resources in promoting economic growth, while the resources curse hypothesis alludes that natural resources, in the developing countries, reduce economic growth. The present research uses the contemporary Methods of Moments Quantile Regression method to explore on this relationship in the fifteen natural resources‐rich African countries. The data used are annual data for the period 1990 to 2021. The major results presented in this research show that natural resources rent significantly promotes economic growth in this region, supporting the postulations of Rostow's hypothesis. Renewable energy is also observed to play a significant role in raising economic growth of this region. However, labor force participation rate is determined to reduce economic growth and this can be explained by high levels of unemployment in this region. Capital provides a positive but insignificant effect on economic growth of the natural resources‐rich African countries. The study results also show that economic growth, capital, trade openness, and labor force enhance natural resources rent. The study calls for the improvement in the use of renewable energy and natural resources in order to attain sustainable economic development in this region.

Exploring the nexus of geopolitical risk, green financing, and natural resource rents: A study of Russia's economic growth

Geopolitical risk encompasses various uncertainties arising from political, social, and economic factors, which can significantly influence a country's economic performance. Therefore in this study we analyzed the impact of geopolitical risk (GPR), green financing, and natural resource rents (NRR) on Russia's economic growth during 2000–2022 is examined in this study. The collected data is analyzed using simple quantile regression, the ADF unit root test, Johansen Co-integration, and other time series methods. A unit root test shows that level (1) data is stable and that variables are co-integrated. Quantile regression research shows that GPR positively impacts economic growth at the median and higher quantiles. In addition, green finance and commerce boost economic growth across all quantiles. The results support the resource curse hypothesis, which claims that NRR negatively affects economic growth. The Granger causality test shows that GDP and its explanatory components are causally related. These findings were compatible with quantile regression estimates after a parametric examination. The policy implications for researchers and politicians concerned with green finance, natural resource sustainability, and geopolitical dangers to economic growth are significant.

Going Sustainable or Going Extinct: The Consequences of Clean Technologies, Green Finance, and Natural Resources on the Environment

Although “green” and “clean” are key terms in sustainable environmental development, the literature on the relationship between green finance, clean environmental technology, and a sustainable environment is lacking. Furthermore, the exploitation of natural resources may provide a distinctive perspective on this interconnection, contributing to more promising policy ramifications for the future planet. Thus, this study examines the impact of sustainable environmental technologies, green finance, natural resource rents, and economic growth on environmental sustainability, proxied by the novel “Environmental Sustainability Index (ESI)”. This analysis utilizes data spanning from 2000 to 2021 for China, applying the cutting-edge “augmented autoregressive distributed lag (AARDL)” model. The findings indicate that sustainable environmental technologies do not effectively enhance long-term environmental sustainability, but rather provide a positive contribution to the environment in the short term. In addition, economic expansion and the exploitation of natural resources have adverse effects on environmental sustainability, both in the near term and over an extended period. Nevertheless, green finance has a significant role in promoting environmental sustainability in China. This study further reveals the causal relationship between the chosen variables. This study highlights the necessity of developing a comprehensive strategy aimed at enhancing environmental sustainability and green finance. This can be achieved by allocating funds towards the advancement of clean environmental technology and the extraction of eco-friendly natural resources.

Spatio-temporal investigation of economic growth and environmental quality nexus in EU countries: New guidelines regarding green goods and eco-tax.

The issue of environmental degradation has become pertinent and the call for carbon neutrality has intensified in recent years. Achieving this target will require countries to meet the conditions of the sustainable development goals. To do this, the study applied spatiotemporal modelling and the generalized method of moments (GMM) to examine the nexus between economic growth (EG) and the load capacity factor (LCF) through environmental goods (ENG) and environmental tax (ENT) among European Union (EU) nations from 1995 to 2018. The findings demonstrate that spatial dependence leads to a change in EG and LCF that impacts the EG and LCF of the neighbouring countries. The study also found that there is a significant positive and bidirectional relationship between economic growth and load capacity factor. Moreover, the study revealed that a positive effect of ENG, ENT, REN and Human Capital Index (HCI) on EG, with a reducing effect from natural resource rents (NRR). Finally, HCI improves environmental quality, while ENG, ENT, REN and NRR degrade the environment. Our findings justify the need for EU countries and other developed nations to implement policies that will help achieve a green economic transformation.

Dynamic nexus between natural resource rents, economic growth, and environmental quality: A comparative study between China and the US

AbstractEconomic development and environmental sustainability have recently become global priorities. This study utilizes the nonlinear autoregressive distribution lag model (NARDL) to investigate the asymmetric effects of natural resource rents on economic growth and environmental quality in China and the United States from 1970 to 2020. The findings indicate that natural resource rents exert asymmetric effects on economic growth and environmental quality in both countries; however, the impact patterns differ between the two countries. In the short term, a decrease in natural resource rents significantly increases GDP per capita in the US, while an increase in natural resource rents has no effect. Moreover, natural resource rents do not influence the ecological footprint in the US. By contrast, China's GDP per capita remains unaffected by natural resource rents, while the ecological footprint is significantly influenced by both positive and negative changes in natural resource rents, exhibiting asymmetric impacts. In the long run, an increase in natural resource rents significantly impacts both GDP per capita and the ecological footprint in the US, while a decrease only impacts the ecological footprint. By contrast, both increases and decreases in natural resource rents impact per capita GDP and the ecological footprint in China. These findings highlight the importance of tailoring country‐specific policies to facilitate sustainable economic development and enhance environmental quality.

The Dual Faces of growth: Linear and non-linear effects of industrialization, financial development and natural resource rents on China's economy

The literature on driving indicators of economic growth shows diverse findings and commonly derives symmetric relationships. The current research aims to observe the linear and non-linear influence of primary indicators of interest. The results reveal that industrial value-added positively, while urbanization negatively influences China's short and long-term economic growth. Conversely, natural resource rents exhibit no immediate positive effect but contribute to long-term economic growth. A positive change in industrial value and financial development enhances economic growth with a more profound positive shock in the short and long run. Simultaneously, their negative change reduces the economic growth in China. Whether positive or negative, fluctuations in natural resource rents contribute to economic growth, waving the asymmetric dynamic in the short and long run. Further, urbanization boosts economic expansion during negative shocks but lacks significance during positive shocks in both short and long runs. Moreover, the frequency domain causation approves the structural transformation. In the same scenario, notable discrepancies in wavelet decomposition show significant fluctuations across all series, contributing to economic growth. To boost both immediate and sustained economic growth, investing in industries focused on value addition and refining urban planning to balance growth between megacities and smaller emerging urban areas is essential.

Environmental deterioration, renewable energy, natural resource rents, and schooling in Türkiye: Does the degree of energy transition matter for environmental quality?

Within the literature on energy and environmental economics, it is generally acknowledged that renewable energy can improve environmental quality; however, certain papers suggest that an optimal level of the usage of renewable energy sources may exist. Consequently, the utilization of renewable energy sources can result in environmental degradation up to a certain threshold. Then, environmental quality can be enhanced through the continued application of renewables. This indicates that the link between renewable energy and environmental devastation is inverted U-shaped.This paper presents empirical evidence concerning this possible association between renewable energy and environmental destruction in Türkiye, a country where fossil energy predominates in the energy mix. Additionally, the paper investigates the environmental influences of natural resource rents and schooling. This study utilizes annual data from 1971 to 2020 and implements time series methodologies that rely on the Fourier approximation. The paper thus accounts for an undetermined quantity of structural breaks. The results suggest that an inverted U-shaped link occurs between renewable energy and environmental destruction, signifying renewable energy initially contributes to a diminution in environmental quality before subsequently improving it. Additionally, environmental quality is positively associated with natural resource rents and negatively associated with schooling, according to the findings. Furthermore, the findings reveal that schooling worsens the combined effect of renewable energy on environmental degradation. These conclusions are discussed in the paper.

Sustainable development in ASEAN: The role of trade diversification, government revenue, and natural resources

AbstractOver the past few years, the Association of Southeast Asian Nations (ASEAN) has experienced great economic expansion, which has resulted in varied degrees of diversified commerce, an elevated level of government revenue, and an increase in the demand for energy. The purpose of this study is to provide a solution to this conundrum by analyzing the effects of trade diversification (TDF), government revenues (GRN), gross domestic product (GDP), and natural resource rent (NTR) on the sustainable development of the ASEAN countries between the years 1981 and 2022. In order to accurately portray the concept of environmental sustainability, the ecological footprint (EFP) is utilized to represent sustainable development. The quantile‐based econometrics technique known as the Method of the Moments Quantile Regression (MMQR) has been utilized in order to investigate the direction and amplitude of the asymmetric correlation that exists between the interaction of GRN, TDF, NTR, and EFP. According to the estimations of the MMQR, it is proposed that government revenues, which include significant financial incentives that promote the stringent execution of environmental rules, hence avoiding deleterious impacts on the environment, have negative coefficients at all quantiles (Q0.25 − Q0.90). Conversely, TDF and GDP have a positive and statistically strong significant correlation across all quantiles (Q0.25 − Q0.90), revealing that TDF reduces environmental sustainability and expands the size of the world's EFP by making energy‐intensive products more accessible. In addition, the Augmented Mean Group (AMG) and the Common Correlated Effect Mean Group (CCEMG) both provide evidence that supports the correlation study by demonstrating that there is a similar pattern of causality across variables.

Determinants influencing ecological footprints of China; An empirical evidence from factor analysis

China has advanced significantly in the last decades, but ecological concerns raise questions about the nation's long-term affluence. The hunt for possible determinants in explaining the quality of the environment (ecological footprint) is still in progress. Therefore, the current study attempts to investigate the influencing factors from various explanatory variables (eco-innovation, economic complexity, renewable energy consumption, economic growth, natural resource rent, foreign direct investment, the energy intensity level of primary energy, economic development, Public-private partnerships investment in energy, electric power consumption, and population growth) through factor analysis augmented with Back Propagation Neural Network (BPNN) approach. The annual data from 1995 to 2021 for China is retrieved for empirical analysis. The data set comprises the factors classified into training, validation, and testing divisions with a ratio of 2:1:1. The outcomes revealed that extracted factors are robust in explaining China's ecological footprint variation. Outcomes of the BPNN algorithm suggest that renewable energy consumption, eco-innovation, economic complexity, natural resource rent, and electric power consumption are the most useful determinants in explaining the ecological footprints of China. The study furnishes the possible policy implications of the research.

Navigating climate challenges: Focusing on the effectiveness of natural resource rents, fintech, green finance, environmental quality, and digitalisation

China indeed has made great efforts to maintain environmental quality. However, it should be noted that climate challenges normally emerge when certain nations heavily depend on non-renewable resources to meet energy demands. It is quite difficult to reduce the dependency because such economies are ranked as a major importer of fossil fuel resources. This means, pollution and emission rates in subsequent economies are increasing with the passage of time. The spontaneous fintech growth and financial inclusion, natural resource volatility and increasing economic activities in China have triggered vicious climate challenges. Therefore, the study intends to explore the relationship between fintech, financial inclusion, green finance, natural resource rent and environmental quality in China over the time period of 1998–2022. Using ARDL technique, it was found that fintech, financial inclusion and green finance enhance environmental quality, whereas natural resource rents are responsible of degrading environmental quality. Therefore, Chinese authorities should use resources related to green finance to facilitate fintech industry. Besides, blending fintech solutions such as NFTs and cryptocurrencies with traditional financing for environmental sustainability, there is also a need to establish standard laws and procedrues for these products.