Natural resource rents and economic growth in the top resource-abundant countries: A PMG estimation

The relationship between natural resource rents and economic growth has witnessed a lively debate since last decades. It has been shown that many countries rich in natural resources have experienced a disappointing economic growth. Still the key challenges how turning resource rents into a driver rather than a detriment of development. This paper contributes to the existing literature by focusing on the causal linkages between total natural resource rents and economic growth in a sample of top resource-abundant countries over the period 1970-2013. The implementation of the Pooled Mean Group (PMG) estimator reveals interesting findings. The latter give support for the natural resource bless hypothesis in the long-run, while no such evidence is confirmed in the short-run. Findings suggest also that economic growth exerts a positive impact on resource rents. On the other hand, the causality analysis indicates that a feedback causal relationship exists between the two variables. The short-run country-specific analysis shows the heterogeneity of results across countries, which constitutes an argument towards the use of the PMG estimator when investigating the resource rents-economic growth nexus.