e-ISSN 2231-8542
ISSN 1511-3701

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New Evidence on Natural Resource Curse for OIC and Non OIC Countries

Kunchu, J. A. B., Sarmidi, T., Md Nor, A. H. S. and Yussof, I.

Pertanika Journal of Tropical Agricultural Science, Volume 24, Issue 4, December 2016

Keywords: Natural Resource, human capital, economic growth

Published on: 22 Nov 2016

This paper looks deeper into the resource curse hypothesis and focuses on the types of natural resources such as minerals, oil, natural gas, forestry and coal. This study argues that natural resources are not a curse to real income but that the type of natural resources and human capital that a country is endowed with are the reason why some resource-rich countries are successful while others are not. Unlike most of the previous studies which emphasize growth, this study emphasizes real income. This study also aimed to determine the type of natural resource that may act as a driving force or as an obstacle to a country. Additionally, human capital and institutions are examined as key factors in determining whether a country's rich natural resources are a "blessing" or a "curse".This study provided an empirical analysis of the period between 1981 and 2010 by using panel data which was analyzed using GMM (Generalized Method of Moments), a technique that has not been widely used in research related to natural resources. In order to measure the wealth of natural resources, this study employed the data of natural resource rents in relation to the type of natural resources. The data were collected from the World Bank. The study also used a number of control variables to measure human capital. The findings showed that natural resource wealth in OIC and non-OIC countries can be a curse or a blessing depending on the type of natural resource assets. This is evident from the findings that showed that the correlation between the type of natural resources and incomes is mixed; i.e. there are some positive and some negative correlations. Interestingly, the findings consistently demonstrated that human capital and quality of institution both encourages the increase in real income. The abundance of natural resource is indeed a blessing for high quality human capital.

ISSN 1511-3701

e-ISSN 2231-8542

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