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Mohseni R, Moridi Farimani F, Khanlarkhani S. Natural Resource Abundance and Economic Growth in Mineral Exporting Countries. QJER 2024;
URL: http://ecor.modares.ac.ir/article-18-74134-en.html
URL: http://ecor.modares.ac.ir/article-18-74134-en.html
1- Assistant Professor, Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran , re_mohseni@sbu.ac.ir
2- . Assistant Professor, Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
3- M.A. in Economic Systems and Planning, Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
2- . Assistant Professor, Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
3- M.A. in Economic Systems and Planning, Department of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran
Abstract: (262 Views)
Aim and Introduction
Many theories and models of economic growth have identified capital as one of the most important drivers and determinants of economic growth and development. For years, it was believed that abundant natural resources, as part of a country’s capital, constituted a divine blessing, as they could be converted into other forms of capital and contribute to overall economic development. Consequently, countries rich in natural resources were expected to perform better economically than those without such resources. However, over time, particularly after World War II, empirical evidence revealed that most resource-rich countries performed poorly compared to resource-poor countries.
some empirical studies have highlighted a positive relationship between natural resource abundance and economic growth. Stijns (2001), using an alternative variable from Sachs and Warner (1995) to measure resource abundance, found no evidence of the detrimental effect of natural resources on economic growth. Lederman and Maloney (2003) also reported a positive relationship between resource abundance (measured by net resource exports per worker) and economic growth.
Sala-i-Martin and Subramanian (2003) contended that the relationship between natural resource abundance and economic growth loses statistical significance once institutional quality is accounted for. They suggested that the effect of natural resources depends on the type of resource, indicating that fuel and mineral resources negatively affect institutions (and thus economic growth), whereas the relationship between economic growth and other types of resources is not statistically significant. Similarly, Papyrakis and Gerlagh (2004) demonstrated that when variables such as corruption, investment, degree of freedom, terms of trade, and education are controlled and managed, the abundance of natural resources would have a positive effect on economic growth.
Thus, it can be concluded that not all resource-rich countries have experienced poor economic performance or economic decline. In certain cases, the optimal utilization of abundant resources has led to significant economic growth and increased per capita income.
Economic growth remains the primary goal of all economies, as it is directly linked to maximizing societal welfare. Economic growth encompasses increased utilization of inputs, improved productivity of production factors, and enhanced employment opportunities. Natural resources are among the most crucial sources of production in any country. According to growth and development theories, as well as international trade theories, these resources can provide a comparative advantage for an economy. Income generated from natural resource abundance can create national wealth, spur economic progress, increase societal welfare, and reduce poverty. In this regard, mineral resources are considered a key factor in accelerating investment and economic growth.
Methodology
This study examines the economic growth patterns of Iran and a group of mineral-rich countries from 2000 to 2020. A panel data method was employed to estimate and evaluate the results, considering the similarities between the selected countries and Iran in terms of mineral resource abundance.
In the research process, the final variables and the functional form of the model were identified, and data processing, analysis, and model estimation were conducted using Stata software. The data used in the study were collected from official sources, including the Central Bank, the Statistical Center of Iran, and the Ministry of Industry, Mine, and Trade. Additionally, for data on other countries, international sources such as the World Trade Organization (WTO), the World Bank, the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund’s (IMF) STAN database were utilized.
Findings
The study investigated the direct and indirect effects of natural resource abundance on economic growth through channels such as physical capital accumulation, research and development (R&D) investment in technology, labor, financial development, and economic freedom across three groups of countries. The first group includes countries with both mineral resources and oil, the second group consists of countries with only minerals, and the third group comprises countries with only oil resources. The generalized fixed effects model was selected as the final model for all three groups. According to the results:
The results suggest that the hypothesis of natural resource abundance positively influencing economic growth is supported for the first and second groups of countries. However, this hypothesis is not confirmed for the third group, which includes Iran.
The findings underscore that the impact of natural resources on economic growth is contingent upon various factors, including the type of resource, the quality of institutions, and the effectiveness of economic and governance policies. While some resource-rich countries have successfully translated their natural wealth into economic prosperity, others, including Iran, have faced challenges in maximizing the economic benefits of their natural resources.
Many theories and models of economic growth have identified capital as one of the most important drivers and determinants of economic growth and development. For years, it was believed that abundant natural resources, as part of a country’s capital, constituted a divine blessing, as they could be converted into other forms of capital and contribute to overall economic development. Consequently, countries rich in natural resources were expected to perform better economically than those without such resources. However, over time, particularly after World War II, empirical evidence revealed that most resource-rich countries performed poorly compared to resource-poor countries.
some empirical studies have highlighted a positive relationship between natural resource abundance and economic growth. Stijns (2001), using an alternative variable from Sachs and Warner (1995) to measure resource abundance, found no evidence of the detrimental effect of natural resources on economic growth. Lederman and Maloney (2003) also reported a positive relationship between resource abundance (measured by net resource exports per worker) and economic growth.
Sala-i-Martin and Subramanian (2003) contended that the relationship between natural resource abundance and economic growth loses statistical significance once institutional quality is accounted for. They suggested that the effect of natural resources depends on the type of resource, indicating that fuel and mineral resources negatively affect institutions (and thus economic growth), whereas the relationship between economic growth and other types of resources is not statistically significant. Similarly, Papyrakis and Gerlagh (2004) demonstrated that when variables such as corruption, investment, degree of freedom, terms of trade, and education are controlled and managed, the abundance of natural resources would have a positive effect on economic growth.
Thus, it can be concluded that not all resource-rich countries have experienced poor economic performance or economic decline. In certain cases, the optimal utilization of abundant resources has led to significant economic growth and increased per capita income.
Economic growth remains the primary goal of all economies, as it is directly linked to maximizing societal welfare. Economic growth encompasses increased utilization of inputs, improved productivity of production factors, and enhanced employment opportunities. Natural resources are among the most crucial sources of production in any country. According to growth and development theories, as well as international trade theories, these resources can provide a comparative advantage for an economy. Income generated from natural resource abundance can create national wealth, spur economic progress, increase societal welfare, and reduce poverty. In this regard, mineral resources are considered a key factor in accelerating investment and economic growth.
Methodology
This study examines the economic growth patterns of Iran and a group of mineral-rich countries from 2000 to 2020. A panel data method was employed to estimate and evaluate the results, considering the similarities between the selected countries and Iran in terms of mineral resource abundance.
In the research process, the final variables and the functional form of the model were identified, and data processing, analysis, and model estimation were conducted using Stata software. The data used in the study were collected from official sources, including the Central Bank, the Statistical Center of Iran, and the Ministry of Industry, Mine, and Trade. Additionally, for data on other countries, international sources such as the World Trade Organization (WTO), the World Bank, the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund’s (IMF) STAN database were utilized.
Findings
The study investigated the direct and indirect effects of natural resource abundance on economic growth through channels such as physical capital accumulation, research and development (R&D) investment in technology, labor, financial development, and economic freedom across three groups of countries. The first group includes countries with both mineral resources and oil, the second group consists of countries with only minerals, and the third group comprises countries with only oil resources. The generalized fixed effects model was selected as the final model for all three groups. According to the results:
- The share of mineral resources in exports was significant and positive for the first and second groups of countries, whereas it was significant and negative for the third group, which includes Iran.
- The share of oil and gas resources in exports was significant and positive for the first group of countries, but it had a significant negative impact for the third group.
- The unemployment rate had a significant negative relationship with per capita income across all groups.
- The total factor productivity index was positive and significant for all groups, positively influencing per capita income.
- Research and development expenditures had a significant positive effect on per capita income across all groups.
- The economic openness index was significant for all groups, positively affecting per capita income.
- The institutional quality index was significant for all groups, positively influencing per capita income.
- The net foreign direct investment variable was significant for the second group but had a negative effect.
The results suggest that the hypothesis of natural resource abundance positively influencing economic growth is supported for the first and second groups of countries. However, this hypothesis is not confirmed for the third group, which includes Iran.
The findings underscore that the impact of natural resources on economic growth is contingent upon various factors, including the type of resource, the quality of institutions, and the effectiveness of economic and governance policies. While some resource-rich countries have successfully translated their natural wealth into economic prosperity, others, including Iran, have faced challenges in maximizing the economic benefits of their natural resources.
Article Type: Original Research |
Subject:
Economic Development and Growth
Received: 2024/03/4 | Accepted: 2024/06/12
Received: 2024/03/4 | Accepted: 2024/06/12
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