Investigating resource curse/Blessing hypothesis in Central Asia: Do mineral resources matter for economic growth?

This study aims to calculate a single threshold level of institutional quality to decide whether the resource curse hypothesis or the resource blessing hypothesis will be validated for central Asia countries, Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan. There are two reasons why these countries are used as sample countries. First, these countries were established after the breakup of the Soviet Union and are young economies with relatively low institutional quality. Secondly, the natural resources of such countries constitute 67.8% of their total GDP. These two factors, therefore, make these countries unique in testing the resource curse hypothesis through a level of institutional quality. We utilize the panel threshold regression model and find that low institutional quality leads to the resource curse hypothesis, whereas higher institutional quality causes resource blessing. Our empirical findings indicate that mineral resources will enhance economic growth if policymakers increase their institutional quality levels above -1.35. If this calculated level equals or is lower than -1.35, mineral resources will cause a decline in the economic growth of such resource-rich countries. Hence, this threshold level is crucial for policymakers to promote economic growth by using their mineral resources. This single level may also mean whether mineral resources are used sustainably and efficiently in these countries. From this perspective, a level below this threshold may require policymakers to replace policies with new threshold-level targeted resource policies.