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ABSTRACT
Natural resources influence economic performance through many different mechanisms, both beneficial and harmful. Some of these mechanisms tend to set in fast while others are rather slow. This suggests that pooling the long- and short-run effect as typical in the resource empirical literature may lead to incorrect inferences. This article provides an evaluation of the income contribution of natural resources using a panel cointegration approach that allows for short-run dynamic heterogeneity while imposing the restriction of long-run homogeneity. It finds, in a sample of developing countries over the period 1990–2012, that natural resources are a curse in the long run. The evidence is robust to alternative dynamic specifications, different measures and types of natural resource wealth, and controlling for regional effects.
Notes
1. The long-run negative impact of natural resources on income is further confirmed by the Dynamic Ordinary Least Squares (DOLS) estimator. The results are not reported but available upon request.
2. We also reach similar results for resource rents, agricultural exports and non-agricultural primary exports. These results are not reported but available upon request.