Overcoming the Resource Curse: Does Resource Governance Matter?

Abstract

The relationship between natural resource-richness and economic growth and development has been a focus of discussion for decades but recent debate was started in the 1990s. There has not been agreement as to how natural resources are vital to economic growth. This paper re-examines two main aspects of resource curse and growth literature, the first has to do with the measurement of natural resource endowment and economic growth while the second one has to do with the institutional quality. We employed standard empirical growth model, both OLS and 2SLS estimators with cross sectional data average over the periods 2008-2012. Our results reveal a direct positive link between natural resources endowment and economic growth, the positive association between resource and economic growth are strong in the natural resources rents per capita. In addition, our findings also indicate no evidence of negative effects of natural resources through the institutional quality. The possible implication to be drawn from this study is that countries should establish robust natural resource mechanism to cater for the uncertainties in this sector. Finally, government of resource endowed economies should have a special account where windfall gains from the resources sector can be deposited pending economic and social infrastructure.