RESOURCE CURSE, ECONOMIC GROWTH AND DEVELOPMENT: PANEL DATA EVIDENCE FROM NATURAL RESOURCES-RICH COUNTRIES

Abstract

This thesis examines three plausible explanations for the natural resource curse phenomenon– the Dutch disease, institutional quality, and human capital. The phenomenon implies that countries rich in natural resources tend to have lower economic growth and development compared to countries that have fewer natural resources. The examination of this phenomenon has been organised into three empirical essays in the thesis. The first empirical essay applies the panel data fixed effect with Driscoll and Kraay’s standard errors and cross-sectional augmented distributed lag (CS-ARDL) approaches to examine the Dutch disease problem. Our results show strong evidence that the spending and the resource movement effects of the Dutch disease, particularly in oil-rich developing countries, negatively affect economic growth and development. The second empirical essay assesses the role of institutional quality in reducing the resource curse. Using the CS-ARDL approach and oil rents as a proxy for natural resources, the results show that oil is a blessing as it results in high economic growth but may become a curse for poor quality institutions, especially in oil-rich developing countries. The objective of the third empirical essay is to explore whether natural resources increase the spread of and deaths from infectious diseases, using the CS-ARDL and common correlated effect (CCE) approaches in a panel data a sample of 37 Sub-Saharan African (SSA) countries. The findings of this chapter strongly evince that natural resource rents are associated with higher death rates from acquired immune deficiency syndrome (AIDS), tuberculosis (TB), and prevalence of anaemia, confirming the resource curse. The results recommend that policymakers of countries affected by the resource curse problem should diversify their economy away from the natural resources sector, improve institutional quality, and increase investment in human capital. This helps to convert the resource curse into a blessing and leads to higher rates of economic growth.