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On the Good and Bad of Natural Resource, Corruption, and Economic Growth Nexus

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  • Chandan Sharma

    (Indian Institute of Management Lucknow)

  • Ritesh Kumar Mishra

    (University of Delhi)

Abstract

The empirical finding that countries endowed with vast reserves of natural resources are expected to experience slower economic growth – the resource curse hypothesis – has sparked debate in the literature about whether natural resources are a curse or a boon. In this study, we re-investigate the natural resource, corruption and growth nexus by using a relatively longer dataset for a panel of countries. Unlike previous attempts, we take into account the potential endogeneity and asymmetric effect in our analysis by applying a recently developed panel quantile estimator. We also focus on the role of corruption in influencing the impact of natural resources on economic growth. Broadly the findings are indicative of an asymmetric effect of resources as the sign and magnitude of natural resources’ impact on economic growth varies over different income quantiles. Although the overall results are mixed, but the results based on fuel export and oil–gas rents as measures of resource endowment are consistent with the ‘resource curse’ hypothesis. Nonetheless, the findings suggest that corruption is critical in determining the marginal impact of natural resources on growth and in many cases, it has effectively transformed the negative effects of natural resources to positive effects in low-to-middle-income countries.

Suggested Citation

  • Chandan Sharma & Ritesh Kumar Mishra, 2022. "On the Good and Bad of Natural Resource, Corruption, and Economic Growth Nexus," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(4), pages 889-922, August.
  • Handle: RePEc:kap:enreec:v:82:y:2022:i:4:d:10.1007_s10640-022-00694-x
    DOI: 10.1007/s10640-022-00694-x
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    More about this item

    Keywords

    Resource curse; Economic growth; Corruption; Panel quantile regression;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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