Oil Rents Research Articles

Employment generation via natural resources: A novel perspective of Dutch disease in the employment market

Regarding the factors influencing employment in emerging economies, the literature relatively ignored this sector. This study tends to analyze employment generation through natural resources while considering each natural resource's component. Also, this study explored the role of economic growth and renewable energy consumption in employment generation in emerging seven economies from 1989 to 2021. Using advanced panel data analysis approaches, this study found significant cointegration between the variable under consideration. Due to the data's non-normal property, this study employs the novel non-parametric approach. It concludes that economic growth and forest rents are the significant factors of employment generation in the region. However, the coal rents, natural gas rents, oil rents, and renewable energy use are significantly reducing employment generation in the selected economies. The adverse impact of these resources validates the Dutch disease in Emerging economies across the period. The results are found to be consistent and robust via bootstrap quantile regression. This study suggests policies regarding the efficient extraction of natural resources such as coal, forests, natural gas, and oil. Also, emerging economies should increase investment in the renewable sector, which reduces emissions and encourages employment.

Do natural resources ensure access to sustainable renewable energy in developing economies? The role of mineral resources in a resources-energy novel setting

Natural resource rents offer both opportunities and challenges. Effectively harnessing these rents while mitigating the associated risks is crucial for promoting sustainable economic development, environmental conservation, and social welfare in these nations. This study highlights the role of natural resource rents, economic activity, and energy efficiency on renewable electricity output in case of BRICS countries from 1988 to 2021. Investigating the nexus between resources' rents on renewable electricity output in BRICS countries is crucial because each of the BRICS countries has unique energy profiles and large natural resource reserves. The significant results of the Westerlund cointegration test provide strong evidence of a long-term association amongst natural resource rents, GDP, energy efficiency, and renewable electricity output in the BRICS countries. This finding highlights the importance of understanding and considering the long-term dynamics and interdependencies among these variables when formulating policies and strategies for sustainable energy development. The estimates of the quantile regression approach suggest that coal rents and mineral rents negatively affect renewable electricity output. On the contrary, energy efficiency, forest rents, oil rents, and GDP positively affect renewable electricity output. The findings underscore the need for tailored policies by addressing each country's key challenges and opportunities. By leveraging natural resource rents, promoting sustainable economic growth, and enhancing energy efficiency, BRICS countries can accelerate their transition to a more sustainable and renewable-based energy system, contributing to global climate change mitigation efforts.

Natural resources: A determining factor of geopolitical risk in Russia? Revisiting conflict-based perspective

Geopolitical risk has recently gained attention in the empirical literature as a significant factor influencing various economic sectors and financial indicators. The relationship between natural resource rents and Geopolitical risk (GPR) has been explored to some extent, focusing on how geopolitical risks affect natural resource rents. However, fluctuations in natural resource rents could also have feedback effects on Geopolitical risk. For this purpose, we analyzed the impact of disaggregated natural resources and GDP growth on the geopolitical risk of Russia by utilizing the data from 1988 to 2021. The bound cointegration test findings conclude that a long-run equilibrium relationship exists among the associated variables. Applying a long-run estimator, the Autoregressive Distributed Lag (ARDL) model results indicated that GDP and forest rents increase GPR. In contrast, oil rents, coal rents, and mineral rents have a decreasing effect on GPR. Moreover, the impacts of resource rents were found to be heterogeneous. The study suggests policies related to promoting economic diversification and addressing income inequality, sustainable forest management practices, and ensuring equitable distribution of benefits that can help reduce social and economic inequality, which may decrease geopolitical risk.

Procyclicality of fiscal policy in oil-rich countries: Roles of resource funds and institutional quality

Fiscal policy management in natural resource-rich countries, particularly the ones struggling with inadequate institutional quality, faces significant challenges because of the dependence of government expenditures on highly volatile revenues of their natural resources. To resolve this issue, most of them have set up natural resource funds; however, the effectiveness of these funds is under debate. Large government expenditures financed by transfers from these funds are not highly likely sustainable and may entail long-term severe economic risks. That brings the necessity of detailed analyses of resource-rich countries' fiscal policy management by integrating the effects of the natural resource funds. This study puts a step forward in this direction; it takes 32 oil-rich countries for the period 1984–2015. Then it analyzes their fiscal policies regarding their government expenditures by unravelling the effects of the presence of the natural resource funds and the adequacy levels of their institutional qualities, categorized with the clustering algorithms. It uses dynamic panel data analysis and elaborates on the proper estimation techniques by considering cross-sectional dependence among data of these countries, heterogeneity of slope coefficients and endogeneity issues. The study reveals that even after controlling the effects of the volatility of the oil price changes and the share of oil rents in total income, resource-rich countries' fiscal policy goes with the flow. In favourable economic conditions, government expenditures are soaring, but when economic downturns happen, their growth levels also turn down. That means high fiscal procyclicality even in the presence of natural resource funds. As expected, the presence of these funds is not sufficient. For the desired countercyclical policy, adequately high enough institutional quality is needed to manage those funds and fiscal policy effectively.

Asymmetric role of natural resources in uplifting the economic status of resource-rich economies

The role of natural resources is quite evident in economic progressions. However, the resource-curse phenomenon is widely accepted through a range of empirical evidence in the literature. Hence, this research aims to examine the role of three proxies of natural resource rents (coal, mineral, and oil rents) and ecological innovations in determining economic growth trends during 1995–2021. Initially, it employed slope heterogeneity, cross-sectional dependence, unit root testing, and cointegration tests. Later, it employs the three-panel estimations entitled dynamic ordinary least square, fully modified ordinary least square, and fixed effect ordinary least square estimation for checking the long-term connection between the variables. Finally, the method of moments quantile regression (MMQR) was applied to evaluate the asymmetric trends in economic growth over lower, medium, and higher growth quantiles. The results show that coal rent's impact on economic growth is negatively significant across all the quantiles. However, mineral rents positively accelerate economic progression under medium and higher-order quantiles, while oil rents tend to reflect an insignificant impact across all the quantiles. Ecological innovations show positively significant coefficients under lower, medium, and higher-order quantiles; nevertheless, the coefficient scores vary across all the quantiles. Alternative estimations have confirmed these findings. Based on the empirical findings, a few policy implications and future directions have also been discussed.

Natural resources led innovation: Employing structural break approach to explore USA's natural resources sector

A plethora of studies exist on the nexus of natural resources and economic expansion; however, the findings are subjective, and therefore, limited studies are available in the US based on the linkage of natural resources and technology via considering structural breaks. The study covers the different gaps in the literature by providing an understanding of whether the NRR fosters innovation or impedes it in the USA. Hence, this study evaluates the linkage of natural resource rents, including mineral rents, oil rents, coal rents, forest rents, and natural gas rents, and technological innovation in the USA from 1980 to 2021. The study also incorporated the role of economic growth as a controlling variable. The study employed ADF and Bayer-Hanck test for unit roots and long-term cointegration. The least squares method is employed as the primary method and for robustness check analysis, the frequency domain causality approach is utilized. The results validate variables are found stationary at difference D (1) and long-term cointegration has been confirmed in the variables. The findings deliberate that natural resource rents have the existence of a resource curse on technological innovation except for mineral rents which are significant even with the inclusion and exclusion of oil and coal rents. The study further concluded that economic growth stimulates technological innovation in the USA. The outcomes of robustness check analysis via frequency domain causality approaches provide similar results and indicate bi-directional causality among variables. It is concluded that natural resources should be diversified and break its cluster of monopolistic rents to sustainable development and foster innovation in the US.

Oil and natural gas rents and CO2 emissions nexus in MENA: spatial analysis.

Oil rents (OR) and natural gas rents (NGR) have significant contributions to the income of the Middle East and North Africa (MENA) economies and may increase emissions. Moreover, spatial autocorrelation is expected in carbon dioxide (CO2) emissions due to the geographically closed economies in the MENA region. Thus, we examine the impact of OR and NGR on CO2 emissions caring spatial dimensions and analyze the environmental Kuznets curve (EKC). We apply the spatial Durbin model technique on the effects of OR, NGR, and economic growth on CO2 emissions in 17 MENA nations from 2000-2019, i.e., Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates (UAE), and Yemen. Moreover, diagnostic tests are applied to reach the most appropriate spatial specification and to have the most robust results. The results disclose that CO2 emissions have spillovers and emissions of any country can damage the environment of neighboring countries. The EKC is corroborated with a turning point of 38,698 constant 2015 US dollars. Israel and Qatar are in 2nd phase of the EKC, and 15 MENA economies are in 1st stage. Thus, the economic expansion of most economies has ecological concerns. The effect of natural gas rents is found statistically insignificant. Oil rents have minute negative effects on emissions of local economies with an elasticity coefficient of -0.2117. Nevertheless, these have a positive indirect effect with an elasticity coefficient of 0.5328. Thus, the net effect of oil rents is positive. One percent increase in oil rents could accelerate 0.3211% of emissions. Thus, we suggest the MENA countries reduce reliance on oil rents in their income to avoid the negative environmental effects of the oil sector.

Sustainable development through digital innovation: A new era for natural resource extraction and trade

Despite the recognized significance of natural resources for economic development, many resource-rich nations struggle to realize their potential, creating a dichotomy in the literature. This study dissects the role of natural resources in fostering sustainable commerce in BRICS nations from 1988 to 2021, a novel exploration incorporating significant control variables such as digitalization, research and development, and GDP. By utilizing panel data from 1988 to 2021, we employ appropriate panel data econometrics techniques to explore long-term relationships. Our findings reveal that while minerals and natural resource rents positively influence sustainable trade, oil rents impede it. Digitalization and economic growth also emerge as key facilitators, whereas renewable energy expenditure negatively affects sustainable trade in the long run. This study provides pivotal insights into the complex dynamics between natural resources and sustainable trade, guiding policy recommendations for optimizing economic outcomes in resource-rich economies.

Analysis of the relationship between oil rent and crude oil production in Cameroon: Evidence from ARDL and NARDL models

This study examines the symmetric and asymmetric impact of crude oil production on oil rent in Cameroon by taking into account the price of crude, human development index (HDI) and corruption over the period 1977–2019; as well as the causal links between the variables. This study uses Augmented Dickey-Fuller and Zivot-Andrews tests to check the stationarity of the variables. Subsequently, ARDL model is estimated and robustness tests are performed to attest the model's validity. The bound test is applied to confirm the existence of long-term relationships. NARDL model follows the same steps and ends with the Wald test to confirm asymmetric effects of variables. Finally, the Toda-Yamamoto causality test is applied to establish the different influences between the variables under study. The main results of this research confirm the existence of oil resource curse in Cameroon, triggered in the long run by the negative and significant linear impact of crude production on oil rent and by the negative and significant effect of positive shocks to crude production on oil rent in the long run. Furthermore, there is a two-way causality between oil rent and crude production. The current study offers a policy orientation according to which a good mastery of crude prices and an optimal social policy, a real barrier against corruption and a stimulator of the quality of productivity, would be essential to perpetuate the exploitation of crude in order to continue to reap more profits. This would ultimately boost the economic structure of Cameroon. The oil rent should really be directed towards the economic circuit of Cameroon and reserve a large part for oil exploration which would allow the discovery of new deposits with a view to perpetuating the exploitation of crude. Cameroon should produce its own crude, transform it and consume it, in order to considerably reduce the effects of the oil curse. This study adds to the literature on the relationship between oil rent and crude production by showing how crude production affects oil rent in Cameroon. This study is the first to highlight the HDI and corruption as additional explanatory variables for oil rent.

Geopolitical risk and economic security: Exploring natural resources extraction from BRICS region

In the economic security and development race, industrialized and emerging economies target different economic and non-economic instruments to achieve higher economic growth and sustainable performance. Emerging economies are paying more attention to the extraction/utilization of natural resources to boost their economic growth. Therefore, the present study evaluates the influence of natural resources, geopolitical risk, and financial development on the economic growth of BRICS economies during 1991–2022. The panel cointegration tests asserted that the study variables are cointegrated in the long run. Using parametric and non-parametric approaches, the empirical results revealed that geopolitical risk and financial development are significant economic security factors boosting regional income. On the other hand, natural resources asymmetrically affect economic growth, where natural gas rents positively, while oil rents adversely affect economic growth. The robustness of the results is tested via augmented mean group and quantile regression approaches. Besides, there exists a two-way causal association between the variables. This study suggests the efficient extraction and use of natural resources, further reduction of the geopolitical risk, and improvement in the financial sector to attain sustainable development and secure economic growth.

Do green foreign direct investments increase the innovative capability of MNE subsidiaries?

Technologies to mitigate climate change may diffuse from lead markets to the rest of the world through several mechanisms and make important contributions to the global green transformation. In this paper, we explore the role played by multinational enterprises (MNEs) in transferring knowledge and innovative capabilities in green technologies to their global subsidiaries. We posit that the degree of green knowledge transfer and innovative capability development in subsidiaries depend on: (i) the host country characteristics, (ii) the specific technology in question, and (iii) the mode of entry. The empirical analysis combines data on foreign direct investments with patent analysis. The results suggest that being a subsidiary of a green MNE has a positive impact on the number and quality of green patents produced locally. This green innovative advantage vis-à-vis domestic companies is larger in less developed countries and in those that are less reliant on oil rents, in particular if they already possess higher levels of relevant domestic innovative capacity. Furthermore, firm and sectoral characteristics also matter. The analysis suggests that green FDIs are more effective when technologies are characterized by low tradability and tacit knowledge. Finally, cross-border acquisitions are more efficient at strengthening green innovative capabilities than subsidiaries established with greenfield investments.

The Impact of Oil Price Volatility on Economic Growth and Stability in Iraq through the Public Expenditure for the Period (2003-2020)

Purpose: The purpose of the research is to analyze fluctuations in global oil prices and identify the factors that control them. The study aims to clarify the nature and characteristics of the international oil market, as well as the relationship between oil, public expenditure, and the economy in rentier countries. The research seeks to provide insights into the economic effects of the dominance of the oil resource and track the trends of oil, public expenditure, economic growth, and development in Iraq. Additionally, the study aims to evaluate the extent to which the fiscal policies pursued by oil rent countries are serving their goals, and to recommend ways to ensure the rationalization of public expenditure and real economic growth in these countries. Theoretical framework: the research is based on several economic theories related to the international oil market and rentier economies. The study uses theories such as supply and demand, rentier state, Dutch disease, and public choice theory to analyze the economic effects of oil revenues in rentier countries, the factors that control the international oil market, and the behavior of governments and policymakers in allocating public funds. Design/methodology/approach: The study adopted the induction method to achieve the objectives of the research and get the intended results by analyzing the data and statistical tables of the sample country. Findings: The research findings suggest that oil rents lead to inefficiency, increased centralization of power, and patterns of public expenditure that decrease efficiency. Rentier economies face challenges in diversifying and reducing their dependence on oil exports. Adherence to budgets and developing transparent and flexible principles is crucial for real economic growth in rentier economies. Effective management of oil revenues and public expenditure is essential for sustainable economic growth in these economies. Research, Practical & Social implications: The research has practical implications for policymakers, emphasizing the need for effective management of oil revenues and public expenditure for sustainable economic growth. Social implications relate to the impact of oil revenues on society, highlighting the need for improved living standards and reduced poverty. Originality/value: The research is valuable as it provides original insights into the economic effects of oil rents and highlights the challenges faced by policymakers in managing rentier economies. The study's emphasis on effective management of oil revenues and public expenditure and the development of transparent and flexible principles adds value to the literature. The research provides valuable insights into the international oil market and emphasizes the importance of sustainable economic growth.

Russia-Ukraine war perspective of natural resources extraction: A conflict with impact on sustainable development

The natural resources-economic growth nexus is extensively debated in the previous literature, and many studies are available. Nonetheless, the studies on the uncertainties created by post-pandemic recovery and Russian-Ukrainian conflict hovering around Russia's natural resource growth nexus; hence, this study contributed to the literature by probing the nexus of natural resource rents and economic growth in Russia from 1990 to 2021. The study also included controlling variables which include FDI and REO. Relevant time series methods are deployed, including NG and Perron, ADF unit root tests for determining the stationarity of the data, ARDL bound tests, and diagnostics tests. The outcomes exhibit that oil rents significantly improve economic growth in Russia. In contrast, mineral rents decrease economic growth in Russia in the study's short-run and long-run dynamics. The results also conclude that FDI and REO significantly enhance the economic growth of Russia, specifically in the long run. The robustness check analysis also supports the results of ARDL estimates. The results of the diagnostic tests indicate that there are no issues of heteroscedasticity or serial correlation, and they provide evidence that the model is stable. This study's conclusions have practical implications for policy regarding Russia's natural resources and their role in economic growth.

Natural resources extraction and geopolitical risk: Examining oil resources extraction in China

This study examines the disaggregated impact of natural resource rents, including natural gas, forest, and oil rents, on China's economic performance. Additionally, we investigate the interactive relationship between geopolitical risk and research and development expenditure. Our econometric analyses, including unit root tests, cointegration analysis using the Bayer-Hanck model, and robustness tests, suggest that oil rents negatively impact China's economic performance, while forest and natural gas rents enhance it. Moreover, we observe that geopolitical risk negatively influences economic performance, while research and development expenditure has a positive effect. Increasing research and development, spending can promote efficient resource utilization and support China's economic growth. Our study's robustness and validity were confirmed through various tests, and we recommend that policymakers and scholars take measures to minimize geopolitical risk while evaluating the relationship between resource rents and economic performance. Overall, our research provides valuable insights into the challenges associated with natural resources and their impact on economic development, contributing to ongoing efforts to promote sustainable economic growth in China.

Resources curse and sustainable development perspective: Fresh evidence from oil rich countries

In recent years, many regions that are rich in natural resources have fallen behind other countries that have fewer natural resources in terms of economic growth. This study examines the role of resource rents on national income of Arab world over the period of 1989–2021. We use mineral and oil rents to capture the resource rents. In order to determine the long-term effects of resource rents on the national income of the Arab world, this study employs the econometric methods of DOLS and FMOLS. In addition to that, the FMOLS approach, which is an asymptotically unbiased and effective estimator, is utilized throughout this study. These approaches can help to address some of the issues that arise in the analysis of time series data, is used in this study to control for endogeneity as well as serial correlation. We find that oil rents are harmful for economic growth, which approves the resource curse phenomena in case of Arab world. The abundance of natural resources in the Arab world could persuade its officials to spend more money on consumption and less on investments in physical capital, which would be detrimental to economic progress. Moreover, reliance on natural resources can lead to a scenario known as the Dutch Disease.

Sustaining Taxation in Rentier Economies: Evidence from Nigeria

The rentier state thesis was proposed to explain the unique political and economic nature of governance in resource-rich countries starting in the 1970s. The wealth in a rentier state is usually accrued through extraction and selling of valuable natural resources under the full control of the government which is mainly directed by a ruling elite group. Nigeria is described as a ‘rentier state’ as a result of its mono-economy in which oil rents play a dominant part. The paper examines the rentier state syndrome in Nigeria and how it affects tax revenues, which are largely based on non-oil sector development. The Rentier State Theory was adopted as the theoretical framework of the study. A documentary research design was used for the study. Data collection was done using secondary sources while data analysis involved the use of descriptive statistics and content analysis. Findings of the study revealed that oil revenue has over the years surpassed tax revenue and remains the mainstay of the Nigerian economy. It also showed that the imbalance between tax revenues and resource rents in Nigeria is due to quick profits from oil; opportunistic rent seeking and rent grabbing; weak private sector; and the desire by political elites to undermine transparency and accountability that comes with a functional tax system. The study recommends economic diversification, deregulation, digitalization and tax transparency as mechanisms for sustaining tax revenues in Nigeria’s rentier economy.

Some factors of energy aid volatility across developing countries: A special focus on renewable sector

Energy aid effectiveness is paramount for the timely achievement of Sustainable Development Goals (SDG)-7. However, the volatility of energy aid reduces its effectiveness. Given this, the paper empirically investigates the determinants of energy aid volatility and its renewable energy generation (REG) component for 76 aid-recipient countries during 2002–2019. By considering recipient and donor-specific factors, we also explore the linkages of all these factors with the direction of volatility, i.e., aid shortfalls and windfalls. Findings reveal that variations in energy/REG aid volatility reflect the recipient's macroeconomic and institutional characteristics more than donor-specific factors. Moreover, the impacts of all these factors vary across aid shortfalls and windfalls. Specifically, economic prosperity and aid dependency increase energy/REG aid volatility, infused by different directions of aid shocks. Contrarily, oil rents, political stability, and strong democracy reduce aid volatility. Multilateral donors provide more stable funding compared to bilateral donors. We also observe that donors provide stable REG aid in countries with inadequate renewable policies and clean development mechanism funding, playing a catalyst role in supporting institutionally weak countries in the renewable sector. We draw certain policy implications for donors and recipients to manage and mitigate the adverse consequences of volatile energy aid flows.

What is the Short-term and Long-term Relationship between Renewable Energy and Investment in Economic Growth?

The topics of energy, environment, natural resources, and economics have recently remained a topic of conversation. Thus, this study aims to determine the short-term and long-term influence between sustainable energy, CO2, oil rents, and investment on economic growth in ASEAN countries. Based on the purpose of the study, this study used the Vector Error Correction Model (VECM) method with the help of Eviews 10. All variables used in this study were cointegrated in the long term. So that renewable energy consumption helps economic growth in ASEAN countries; in other words, renewable energy consumption positively affects economic growth over time. Meanwhile, environmental damage proxied by CO2 hinders economic growth in the long run. This study also shows that ASEAN countries do not experience the curse of natural resources. This can be seen from the value of oil rents has a significant positive effect on economic growth. Meanwhile, investment in ASEAN has not improved the economy, so collaboration from all parties is needed to realize the welfare of the people projected with increased economic growth.

Environment and natural resources degradation under COVID-19 crises: Recovery post pandemic

Environmental stability improved during the covid 19 pandemic when production and industrial activities, and natural resources depletion processes stopped during the lockdown environment worldwide; however, based on the judgment of COP26 and the recent COP27, environmental degradation increased in the world in post-pandemic; therefore, policymakers and researchers re-focused their attention on the determinants of CO2 in economies. Hence, this study investigates the nexus of natural resource rents, including oil rents, mineral rents, and coal rents, on the carbon emissions of upper-middle-income economies from 1984 to 2021. The study included economic growth and renewable energy as additional determinants. We have presented detailed time series methods that aid in examining the modeled variables characteristics in the current research, i.e., ADF and ADF-GLS for a unit root in the data variables and considering their stationarity, Johansen cointegration for long-term cointegration among variables, FMOLS, DOLS and CCR for the long run elasticities between dependent and independent variables and Granger causality test in our range of methods. Robustness checks analysis is done through a non-parametric approach by quantile regression and robust regression analysis. Our results exhibit that two natural resource rents that are oil rents and coal rents, have adverse impacts on carbon emissions, and both are positive and significant. In contrast, mineral rents have no statistical significance and role in the carbon emissions of upper-middle-income economies. Moreover, economic growth and renewable energy also positively and significantly impact carbon emissions. Granger causality analysis exerts that natural resources rents, except for mineral rents, economic growth, and renewable energy, all granger causes CO2 emissions, and the feedback is also true. The relevant findings are suitable for policymakers in upper-middle-income economies to ensure environmental sustainability in upper-middle-income economies.

Energy transition, geopolitical risk, and natural resources extraction: A novel perspective of energy transition and resources extraction

Recently, developed economies have been aiming for energy transition while investing in producing and implementing environmentally friendly energy resources. Numerous factors and indicators could affect the energy transition process. However, the USA, the most industrialized economy globally, still lacks comprehensive empirical evidence regarding those factors influencing energy transition. This study uses the extended dataset covering 1985–2021 and employs advanced time series estimation approaches. Johansen-Fisher and Bayer-Hanck cointegration tests support the presence of a long-run equilibrium relationship between the variables. Utilizing three long-run estimators, the results asserted that economic growth and renewable electricity output enhance energy transition in the country. However, natural resource extraction asymmetrically affects the energy transition, where mineral and oil rents are positively associated with the energy transition, while forest rents and coal rents adversely affect it. On the other hand, geopolitical risk is observed adversely affect energy transition, which is insignificant. This study suggests further increases in renewable energy production and consumption, efficient utilization of natural resources, and reduced geopolitical risk to improve energy transition.