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Natural resources curse or blessing? Evidence from a large panel dataset

Hayat, Arshad and Rakshit, Shoumyadeep (2020): Natural resources curse or blessing? Evidence from a large panel dataset.

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Natural resources are expected to worsen institutional quality, thus slowing economic growth. In this paper, we investigate the link between institutional quality, natural resources, and economic growth. We used a panel data of 117 countries, growth relevant IRCG, institutional quality indicators, and apply the system generalized method of moments. Our results confirm that institutional quality promotes economic growth. We found that natural resource slows down the growth-inducing impact institutional quality only in for corruption and democratic accountability, thus confirming the idea of the natural resource curse. Natural resources were, however, found to enhance the institutions' induced economic growth for all other indicators except corruption, democratic accountability, and bureaucracy, thus confirming the idea of so-called natural resource blessing. The results are robust for two model specifications and across two different indicators of natural resource abundance, namely, natural resource exports and natural resource rents.

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