Analysing the impact of oil capital on economic growth in West Asia and North African countries
by Mushtaq Ahmad Malik; Tariq Masood
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 16, No. 1, 2022

Abstract: Most countries of West Asia and North Africa (WANA) are dependent directly or indirectly on oil resources to fuel growth. There are apprehensions as to whether oil-capital has benefited these countries and their economic growth. The present research seeks to investigate the association between the dependence on oil resources and economic growth of WANA countries from 1970 through 2016. We used the share of fuel exports in total merchandise exports as a proxy for resource dependence. Furthermore, we incorporate measures of institutional quality, terms of trade, and investment as control variables to evaluate if resource dependence impacts growth differently. The empirical investigation found the existence of 'paradox of plenty' or 'resource curse effect'. Both cross-country ordinary least squares (OLS) and two-stage least squares (2SLS) regressions strongly confirm the hypothesis of a negative relationship between fuel exports as a percentage of total merchandise exports and real per capita GDP growth. These results remain robust after controlling for institutional quality, terms of trade, and investment.

Online publication date: Mon, 01-Aug-2022

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