Resource curse hypothesis: fresh evidence from OPEC member countries

• Published date: 01 December 2021
• Author: Nasiru Inuwa,Haruna Usman Modibbo,Sagir Adamu,Mohammed Bello Sani
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/opec.12217

Resource curse hypothesis: fresh evidence

from OPEC member countries

Nasiru Inuwa* , Haruna Usman Modibbo*, Sagir Adamu** and

Mohammed Bello Sani*

*Department of Economics, Faculty of Arts and Social Sciences, Gombe State University, Gombe P.M.B

127, Nigeria. Email: ninuwagsu@gmail.com Email: haroongombe@gmail.com Email:

mohammedbellosani@gmail.com

**Department of Economics, Faculty of Social Sciences, Bauchi State University, Gadau, Yuli Campus,

Gadau, Nigeria. Email: sagiryana11@yahoo.com

Abstract

This study investigated the impact of natural resources on economic growth among the

Organization of the Petroleum Exporting Countries (OPEC) by controlling for institutional quality

and financial development during the period 2008–2018. The study applied the recent generalised

method of moment estimation method proposed by Kripfganz (2019, Generalized method of

moments estimation of linear dynamic panel data models. London Stata Conference, pp. 1–128).

The results revealed a negative and significant impact of natural resource rents on economic

growth. However, oil rents showed a positive and statistically significant impact on economic

growth. Similarly, institutional quality has been found to have positive and significant contribution

to economic growth. Finally, financial development has also been found to have positive and

significant impact on economic growth of the OPEC member countries.

1. Introduction

Natural resource endowed countries ought to have enjoyed unprecedented growth and

development, compared with their less endowed counterparts. Unfortunately, both

anecdotal and empirical evidence revealed otherwise (Sarmidi et al., 2014). This implies

that most resource endowed countries lag behind their less resource endowed countries.

This paradoxical situation is described by Auty (1993) as resource curse hypothesis.

Some of the main reasons identified in the literature include: Dutch disease, poor

institutional quality and rent-seeking behaviour.

Dutch disease is one of the reasons for turning natural resource to be a curse rather

than a blessing. This is because of the preference attached to natural resource exploitation,

which is more profitable in terms of export compared with manufacturing sector, the

result of which leads to reduction in the general output level (Erdogon et al., 2020).

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