Resource-rich Economies Research Articles

Rethinking diversification: Assessing the impact of energy concentration on climate change in rentier and non-rentier countries

Energy diversification, a critical strategy for environmental protection, has been surprisingly understudied in academic discourse. This paper seeks to address this gap by investigating the relationship between energy diversification and climate change in 76 countries from 1990 to 2020. We employ panel data techniques, and the system generalized method of moments (SYS-GMM) to analyze the impact of energy diversification, as measured by the Herfindahl-Hirschman Index, on CO2 emissions. Additionally, control variables such as economic growth, trade openness, foreign direct investment, information and technology adoption, natural resource rents, and urbanization are included in the model. The analysis is re-estimated for various country groupings based on income level and resource dependence (rentier vs. non-rentier). The findings reveal a significant positive association between energy concentration and CO2 emissions across all country groups, with the most pronounced impact is observed in middle-income, resource-rich economies (i.e., middle-income rentiers). The study also highlights differing effects of diversification on CO2 emissions between high-income and middle-income nations, which reflects the prevalence of non-rentier economies among high-income countries and rentier economies in middle-income countries. The causal relationship between CO2 emissions and energy diversification in different groups of countries is tested using the panel Granger causality test. The results reveal strong bidirectional causality between CO2 emissions and energy diversification in all country groups analyzed, except for middle-income rentier countries. By elucidating the multifaceted relationship between energy diversification and climate change, this study aims to provide valuable policy recommendations to advance sustainable development and environmental management.

Resource rents, ethnic fractionalization and redistributive public sector employment

The resource curse literature often posits that public employment in resource-rich economies tends to be large, driven by motivations beyond public goods provision. One set of theories attributes this phenomenon to (ethnic) clientelism, but lacks robust empirical support. Another set of theories challenges the notion of (ethnic) clientelism, suggesting that the expansion of public sector employment serves as a form of social insurance in the absence administrative tools to redistribute income. This study diverges from the conventional story of an invariably positive association between resource abundance and public sector employment. Instead, I show that the positive correlation between resource abundance and public sector employment only holds when ethnic fractionalization is low. In countries with high levels of ethnic fractionalization, the relationship weakens and can even reverse. This is because an increase in public sector employment tends to dilute public sector wages, diminishing the attractiveness of public sector jobs as clientelist rewards. The empirical analysis supports this claim: when ethnic fractionalization is low, more resource rents correspond to higher public sector employment and lower (or even negative) public sector wage premiums; when ethnic fractionalization is high, the opposite holds: more resource rents correspond to fewer public sector jobs but larger public sector wage premiums.

The Nexus between Illicit Financial Flows and Tax Revenue: New Evidence from Resource-Rich African Countries

Resource-rich economies, especially those in Africa, are plagued with the resource curse and Dutch Disease syndromes, which undermine the quest for effectively mobilizing domestic resources toward sustainable and inclusive development. Empirical evidence on the role illicit financial flow (IFF) plays in this regard is relatively scarce. Thus, this study evaluates the volume of IFF and its effect on tax revenue in seven resource-rich African countries. Panel data, sourced for the 2009-2021 period, were analysed using the fixed effect and random effect models while the Instrumental Variable Generalised Method of Moment (IV-GMM), a dynamic estimator, was used for robustness check. Findings revealed that IFF has been on the rise and has detrimental effects on the tax revenue of the sampled countries’ national governments. This is inimical to sustainable development. Thus, the governments and policymakers in these countries must develop pragmatic policy and institutional approaches toward tackling the IFF menace.

Navigating the Oil-environment Nexus: Saudi Arabia’s Challenge in Sustainable Development

This paper delves into Saudi Arabia's challenge of aligning its substantial oil production with environmental sustainability goals, particularly within the framework of Vision 2030. Utilizing an Autoregressive Distributed Lag (ARDL) approach, it examines data from 1980 to 2022, analyzing the relationships between oil production, economic growth, CO2 emissions, and environmental regulation compliance. The study highlights the intricate dynamics between oil-driven economic development and environmental conservation, revealing significant long-term correlations that underscore the environmental costs accompanying economic benefits derived from oil. These findings illuminate the delicate balance Saudi Arabia faces, pointing to the need for sustainable practices in the oil industry and diversified economic growth. The research provides strategic insights for policy formulation, aiming to harmonize economic prosperity with environmental health. This work contributes significantly to the discourse on sustainable development in resource-rich economies, offering a vital perspective on managing natural resources responsibly while pursuing economic growth.

THE EFFECTS OF RUSSIA-UKRAINE WAR ON UKRANIAN ENERGY SECURITY AND EUROPEAN ENERGY SUPPLY SECURITY

Energy has still drawn substantial attention for both developing and industrialised countries in the aspect of the needs of their economies, businesses and households. For Ukraine as a resource-rich economy, energy security and the efficiency of the energy sector are the bases for the national security of Ukraine. It has been triggered by the annexation of the Ukrainian Crimea by Russia and Russia-Ukraine war today. All these problems have urged Ukraine to determine modern energy policy and a national energy security model in the light of the concepts of energy security in the 21st century. As it is known, the energy crises between Russia and Ukraine directly affect the security of European Union energy supply in the context of natural gas flows. The main argument of this study is as follows: The Russia-Ukraine war has severely affected the energy security of Ukraine and this situation has led the European Union countries to finally consider taking steps to diversify the supply and to prevent further deterioration of the EU energy supply security. In this context, the article will analyse how the effects of the Russia-Ukraine war on Ukrainian energy security will affect EU energy supply security.

Sustainability education and resource curse control in the selected resource-rich economies

The “resource curse” paradoxically impacts countries abundant in natural resources, presenting challenges despite their apparent benefits. In 20 such economies, the focus has shifted to using sustainability measures to address this curse, analyzed through Cross-Sectional Fully Modified Ordinary Least Squares. Between 1999 and 2018, sustainable education proved essential in mitigating resource curse vulnerabilities. For instance, a 1% rise in primary school enrollment correlates with a 0.16 decrease in the Resource Curse Vulnerability Index, aiding economic diversification. Similarly, a 1% increase in state education investment leads to a 0.54% reduction in the index, improving human capital and governance. However, higher inflation exacerbates vulnerability, while trade liberalization reduces dependence on resources. Increased electricity consumption and internet access may intensify risks. Effective policies should focus on increasing education investment, supporting Education for Sustainable Development, enhancing media advocacy, promoting renewable energy, and advancing sustainable digital transformation.

Nexus between total natural resource rents and public debt within symmetric and asymmetric framework: Fresh insight from resource-rich economy

Many economies abundant in natural resources often leverage the rents from these resources as collateral for borrowing during periods of economic boom, intending to repay debts during periods of windfall. However, this practice can cultivate irresponsible borrowing tendencies, potentially leading to debt trap scenarios when global resource prices decline. Thus, our study delves into the interaction between public debt (PD) and total natural resource rents (TNR), examining both aggregate and disaggregate forms, with a specific focus on India spanning from 1980-81 to 2021–22.Our aggregate analysis reveals that PD exhibits heightened responsiveness to negative shocks in TNR compared to positive shocks, indicating an asymmetric impact of TNR on PD within the Indian context. Additionally, disaggregate analysis uncovers that both positive and negative shocks in coal rents (CR), natural gas rents (NGR), and forest rents (FR) significantly and adversely affect PD. Furthermore, a positive shock in mineral rents (MR) demonstrates a negative and significant impact on PD, while a negative shock in MR yields a positive but insignificant impact on PD. Overall, barring oil rents (OR), other forms of resource rents such as CR, NGR, FR, and MR showcase asymmetric and negative effects on PD. These findings underscore the importance of prudent institutional behavior and sound economic policies in overseeing and managing debt sustainability in resource-rich economies.

Rentierism—Political Instability Nexus: The Danger of Oil-producing Region Crisis in Nigeria

The growing popularity of the rentier state theory has made the focus on the impact of oil rents on political stability central for revealing how natural resource (including oil) windfalls link to the weakness of institutional quality in any resource-rich economy. Considering the core characteristic of a rentier state (such as Nigeria)—a distributive political economy—the article examines how the stability of Nigerian political system can be affected by oil rents over the period 1996–2021. Through the adoption of autoregressive distributed lag (ARDL) bounds test to cointegration and vector error correction mechanism (VECM) for the test of long-run causality, the apparent effect of oil rents on Nigerian political development is reflected in the analyses and findings. Empirical evidence supports the oil impedes political stability assertion, as there is statistically valid negative association between oil rents and political stability in the short run and long run. It is demonstrated that oil wealth could offer greater incentives for civil conflicts, which have resulted in escalating political problems. In addition, the causality mechanism implies that the relationship found merely indicates association between oil rents and the level of political stability in the long term, and it is not causal. Thus, it is posited that through the adoption and implementation of sound policy measures, the escalation of conflicts would likely subside, especially in most oil-rich regions or states, whereas civil order could be promoted. It is, therefore, critical to enhancing fairness in the use and distribution of oil wealth, improving people’s welfare, particularly in the oil-producing communities and in general, ensuring that democratic principles in the management of resource windfalls are sustained. JEL: Q33, Q34, H56, H12

How has FinTech become a solution for minerals management?

Effectively managing natural resources is crucial for ensuring sustainable economic development, a topic that has been widely debated in recent decades. While numerous discussions have focused on the use of technology to optimize the utilization of natural resources, the previous studies have yet to delve into the role of financial technology (FinTech) in minerals management and energy transition concerning the resource curse/blessing hypothesis. To address this research objective, this study valuably adds to the empirical literature by investigating the role of FinTech and energy transition in economic growth to manage minerals. To accomplish this goal, panel data of the top 10 resource-rich economies that range from 1990 to 2022 based on novel panel estimations such as Cross-sectional autoregressive distributive lag (CS-ARDL) and panel Granger non-causality (Juodis et al., 2021) is taken. The outcomes of the study discovered that FinTech is positively influencing GDP in both the long- and short-run. The robust outcomes further reveal that minerals management (coal, oil, minerals, and forests) becomes a part of enriching GDP to confirm the resources blessing theory. The study analysis sets down the practical implications of formulating sustainable economic development policies for stakeholders.

An integrated perspective on fintech, green innovation and natural resource rent: Evidence from Asia

Countries with abundant natural resources are speculated to have higher carbon discharge levels. Thus, it can be assumed that such countries are likely to face carbon curse issues which come from natural resource consumption. Against this backdrop, identifying potential and effective de-cursing mechanisms is an important task for these nations. Thus, this study is motivated to examine the role of fintech, green innovation, financial and economic development, and natural resources in the per capita CO2 emissions of resource-rich economies. Major Asian economies are chosen as the study sample, and only data from the COVID-19 pandemic period is considered. Method of moments quantile regression (MMQR) is employed to examine the relationships and reveals that financial development and green innovation are both positive indicators of enhanced climate quality at all quantiles. However, natural resource rents and fintech have drastic effects on the sustainable environment as both constructs are responsible for higher emissions. This implies that, in order to build environmentally friendly systems, the innovation levels of industries should be improved, which is possible when green technology innovation is introduced. Green and renewable energy investment must increase to generate funds for low carbon environmental production.

Resilience through mineral resource development, oil, and natural resource efficiency: Strengthening economies

This study examines the role of resilience in bolstering economies via the development of mineral resources and oil, alongside adaptability and natural resource efficiency, particularly within the G7 economies from 1995 to 2022. Employing the Generalized Method of Moments (GMM) model, the research aims to unravel the complexities of how resource-rich economies can leverage their natural assets to enhance economic resilience and sustainability. The investigation reveals a positive correlation between the strategic development of mineral resources, oil, and the adaptability of economies to external shocks, highlighting the critical importance of natural resource efficiency in ensuring long-term economic stability and growth. These findings underscore the necessity for G7 nations to implement policies that not only foster the responsible exploitation and development of natural resources but also promote adaptability and efficiency in resource use. The study's policy implication suggests a paradigm shift towards more sustainable and resilient economic models, emphasizing the balanced integration of resource development and environmental stewardship.

What Advantages Arise from the Shift Towards Sustainable Energy Sources in Resource-Rich Economies? Empirical Insights from Azerbaijan

Azerbaijan, a nation with abundant petroleum resources, aspires to harness the untapped potential of the Caspian Sea's renewable energy resources. The aim for the immediate future is to meet not only domestic energy requirements, but also to establish the nation as a green energy exporter. The nation expects to develop power installations utilizing renewable energy over the forthcoming decades to satisfy a portion of its domestic consumption and also cater to the European market. As part of this colossal project, Azerbaijan anticipates collaborating with international partners to install a 4-gigawatt (GW) power cable traversing the seabed of the Black Sea. The successful realization of these ambitious projects would bolster Azerbaijan's economic sustainability during its post-petroleum phase, while simultaneously enabling a reduction in carbon emissions, offering regional and global benefits. This manuscript seeks to probe the multidimensional implications—political, economic, sociocultural and environmental—of this shift towards wind-derived green energy for Azerbaijan and other nations in the region.

E-commerce mineral resource footprints: Investigating drivers for sustainable mining development

As global economies surge, the escalating demand for precious mineral resources raises environmental concerns regarding mining activities. This study explores factors influencing e-commerce mineral resource footprints in six resource-rich economies from 1996 to 2022. Analyzing relationships between various factors and e-commerce mineral resource footprints, the study identifies key drivers of sustainability in the mining industry, informing policy decisions for responsible resource management. The findings reveal that mining resource incentives, combustible renewable waste, renewable energy demand, and economic growth contribute to increased footprints, while mining resource information has the opposite effect. Causality estimates confirm that resource incentives, combustible renewable waste, and renewable energy cause e-commerce mining footprints. The study corroborates hypotheses, such as mining resource incentives driving green energy development. Impulse response function and variance decomposition analysis predict future trends, offering valuable insights for policy decisions promoting responsible resource management and a sustainable future.

How do mineral resources trade and financial development affect green entrepreneurship in resource-rich economies?

Green entrepreneurship achieves a win-win situation of economic well-being and environmental protection. The role of trade in natural resources and the growth of the financial sector in influencing green entrepreneurship has come under growing attention as the worldwide quest for sustainable development becomes more intense. This study explores the complex interactions between the trade in natural resources and financial development and how these factors affect the development and emergence of green entrepreneurship in resource-rich economies. To that end, we have applied the novel GMM panel VAR technique. The main findings of the GMM panel VAR revealed that financial development and mineral trade positively influence green entrepreneurship. The results also suggest that any change in financial development and mineral causes a change in green entrepreneurship. Understanding the positive influence of financial development and mineral resources trade on green entrepreneurship can guide policymakers in designing effective strategies that promote sustainable green growth.

Academic’s Motivation for Entrepreneurial Engagement: A Systematic Literature Review

The role of faculty in making a university Entrepreneurial is crucial, so is the research on what motivates the faculty to be entrepreneurial. This article is a Systematic Literature Review (SLR), done to find out factors motivating faculty to be ‘entrepreneurial’. Initially bibliometric analysis was done to understand the extent at which research is done on the topic. In all, 59 relevant articles (1995–2023) were selected for SLR. ‘Entrepreneurial motivation’ of faculty is considered to be a niche and less explored area of study due to which building strong propositions becomes a challenge. Majority of studies are of advanced and resource rich economies and applying those to resource constraint situation cannot be considered as an ideal situation. These research gaps are located by this article. Factors motivating faculties to get engaged in entrepreneurial activities were analysed. Existing research has classified motivational factors as intrinsic and extrinsic, in ‘resource constraint’ (push forces) and ‘resource-rich’ (pull forces) environment. The literature states that academicians tend to do explorative activities rather than commercialization related activities. This study has informed about various factors of entrepreneurial motivation which can be used for building instruments for measuring motivation of academic entrepreneurs. The study findings have a strong proposition for the need of empirical research on entrepreneurial motivation of faculty members which is the future scope of research.

The Determinants of Carbon Intensities of Different Sources of Carbon Emissions in Saudi Arabia: The Asymmetric Role of Natural Resource Rent

Natural resource rent (NRR) can be a blessing for the economic growth of resource-rich economies but may cause environmental problems. The present research explores the effects of NRR, economic growth, trade openness (TO), and foreign direct investment (FDI) on the carbon intensities of different sources of carbon emissions in Saudi Arabia from 1968 to 2021. The environmental Kuznets curve (EKC) is substantiated in the relationship between economic growth and the carbon intensities of gas emissions and cement emissions in the long run. The EKC is also validated in models of the carbon intensities of oil emissions, gas flaring emissions, and aggregated CO2 emissions in the short run. TO reduces the carbon intensities of oil emissions, gas emissions, and cement emissions in the long run. FDI mitigates the carbon intensity of gas flaring emissions but increases the carbon intensity of cement emissions. NRR increases the carbon intensities of all investigated sources of emissions in a linear analysis. In a nonlinear analysis, increasing NRR increases and decreasing NRR reduces the carbon intensities of all sources of emissions except aggregated CO2 emissions. In the short-run results, TO decreases the carbon intensity of gas flaring emissions and increases the carbon intensities of gas emissions and cement emissions. FDI decreases the carbon intensities of all sources of emissions. In a linear analysis, NRR reduces the carbon intensities of oil emissions and cement emissions and increases the carbon intensities of gas emissions and gas flaring emissions. In a nonlinear analysis, increasing NRR reduces the carbon intensity of cement emissions and increases the carbon intensities of gas emissions and gas flaring emissions. Moreover, decreasing NRR reduces the carbon intensities of gas emissions, gas flaring emissions, and aggregated CO2 emissions and increases the carbon intensities of oil emissions and cement emissions. The effect of NRR is asymmetrical in models of the carbon intensities of aggregated CO2 emissions, oil emissions, and gas flaring emissions and symmetrical in models of the carbon intensities of gas emissions and cement emissions.

Testing the resources curse hypothesis: Unleashing the role of national governance and financial development in OPEC countries

Financial development is an inclusive objective for economies worldwide, but its connection with natural resources remains a topic of debate. This study aims to address this gap by investigating the impact of the resource-curse hypothesis on economic development in Organization of the Petroleum Exporting Countries (OPEC) countries during the period 1996 to 2021, given their substantial natural resources. Employing a cross-sectional ARDL (CS-ARDL) framework and validating the cointegration results with the Pedroni, Westerlund, and Kao Co-integration tests, this research surprisingly challenges the conventional wisdom of the resource-curse hypothesis. Instead, it reveals that natural resource rents can be beneficial for promoting financial development in high-income resource-rich economies. Furthermore, the study uncovers positive associations between financial development and key factors such as government effectiveness, regulatory quality, renewable energy adoption, economic growth, and urbanization. The findings underscore the significance of strong institutional frameworks in fostering financial development and offer valuable policy recommendations to enhance financial progress in OPEC countries.

Financial stress in Russia: Exploring the impact of oil market shocks

Oil market shocks significantly influence the financial and macroeconomic performance of resource-rich economies, serving as a critical anchor for their economic stability and growth. Russia is a significant exporter of oil and is geopolitically exposed; we examine the response of financial stress levels to decomposed oil market shocks, namely supply-side shocks, demand-side shocks, and financial risk exposures, during the period from July 13, 2012 to June 30, 2022, considering periods of historically abrupt oil price movements. We employ several econometric approaches to estimate our model, including the Cross-Quantilogram approach (CQ), Cross-spectral quantile coherency technique, and Time-varying parameter VAR model with stochastic volatility. Our findings reveal a robust intensification of financial stress in the Russian financial market when oil prices rise due to supply and demand shocks in the short term. Conversely, negative oil price shocks tend to diminish financial stress in the long run. Furthermore, our dynamic analysis indicates that the Russia-Ukraine conflict led to an increase in financial stress caused by oil market shocks, although the effect was comparatively weaker than during the US shale boom. Based on our research, we present several policy implications to address the identified challenges and promote financial stability in the face of oil market volatility.

How does economic complexity affect natural resource extraction in resource rich countries?

Several studies debate whether natural resources benefit or hurt an economy. In natural resource-rich economies researchers cannot conclude it. This study examines the relationship between natural resource rent, economic complexity, clean technology, and natural resource productivity capacity in 20 resource-rich economies from 2000 to 2021. Coal, oil, minerals, natural gases, and forest rents are disaggregated in the study. The economic complexity curvilinear function illustrates the inverse U-shaped relationship under the environmental Kuznets curve (EKC) or the U-shaped relationship under load capacity curve (LCC) between economic complexity and natural resources rent. This study hypothesizes that economic complexity increases resource extraction curvilinearly, changing resource rents which may have implications in the transition towards clean energy under COP27 to achieve SDGs. The study shows the marginal effects of economic complexity at different levels of complexity and resource extraction using quadratic and quantile functions. This study first examines resource extraction quantiles. Economic complexity raises forest, coal, and mineral rents at low resource extraction. Economic complexity lowers forest, gas, oil, coal, and mineral rents at high resource extraction. This study describes the curvilinear function. At the median resource extraction level, economic complexity has an inverted U-shaped effect on forest, mineral, and coal rents and a U-shaped effect on gas and oil rents. This implies that an increase in economic complexity can be targeted which may reduce reliance on forests, minerals, and coal while reducing reliance on gas and oil, government effort, green technology, and productive capacity needed to be pursued.

Do financial inclusion, natural resources and green innovation affect the Sustainable Environment in Resource Rich Economies

Greenhouse gas emissions have been under scrutiny as a significant cause of global warming in the last two decades due to the growing dangers posed by climate change. This makes it essential to investigate the underlying variables that are responsible for emissions of pollutants in order to assist in the formulation of environmental policy. Therefore, the Sustainable Development Goals (SDGs) that have been established by the United Nations aim to reduce the negative effects that resource extractions have on the environment by the year 2030. Considering the relevancy of Financial inclusion (FIN), Natural Resources (NTR) and Green Innovation (GIN), the current study is conducted to evaluate their role in attaining Sustainable Environment (SEN) in the panel of resource-rich countries. For that purpose, the application of Method of Moment Quantile Regressions (MMQR) is made for testing relationships. The outcome reported the positive effects of GIN towards SEN, whereas NTR and FIN were found to destroy the SEN. Based on the findings, there is a need to have initiatives that can be helpful in optimising the NTR, whereas a mindful integration of FIN and GIN can also derive the SEN.