An assessment of the economic impact of natural resource rents in kingdom of Saudi Arabia

In recent decades, the dilemma of natural resource endowments has gained immense importance. It has been argued that natural resources are either a blessing or a curse for any resource rich country. Given the critical role these natural resources play in the economy, the present study estimates the long run and short run impacts of natural resource rents on GDP per capita and Total Factor Productivity in the Kingdom of Saudi Arabia. For this purpose, the cointegration and error correction approach based on the autoregressive distributed lags model is used. The results indicate that natural resource rents increase per capita GDP and Total Factor Productivity significantly in the long run, highlighting that natural resources are considered as a blessing for the Kingdom of Saudi Arabia in the long run. Moreover, enhancement in human capital increases per capita GDP and total factor productivity significantly in the long run. Based on these results, the study suggests that investing in human capital is an urgent move to reach sustainability in the long run, and to decrease reliance on natural resource rents to circumvent the occurrences of the resource curse in the future.