Converting a resource curse into a resource blessing: The function of institutional quality with different dimensions
Abstract
There are a numbser of reasons suggesting that improving institutional quality is the most vital role for nations
that are experiencing or are expected to face a natural resource curse to overcome these challenges. Based on this
debate, this study seeks to examine the relative impacts of different dimensions of such qualities – institutional
quality (that is, index of rule of law, control of corruption, regulatory quality, political instability, voice
accountability, and government effectiveness) – in MENA countries using a cross-sectional and time series data
from period of 1996–2019. In the light of this, the main variable considered is effects of natural resource rents
and other factors, such as human factor and financial developments on real GDP per capita. To achieve the
desired result, panel model techniques was employed to estimate the results, which revealed that natural
resource rents and human capital have positive and significant relationship with real GDP per capita while
financial development have negative impacts, hence diminishes the economic growth of the country. Also, voice
accountability and government effectiveness have negative effects on the real GDP, while the other institutional
quality, except regulatory quality, have significant contribution in increasing the real GDP. The interacting effects of natural resource and voice accountability foster the economic development, and it also have impact in
increasing the size of natural resources, and human capital on the economic development of MENA while at the
same time vanishes the initial negative effects of financial development of the economic growth. Moreover,
interaction of natural resource rent on political instability, government effectiveness, rule of law, and control of
corruption have all significantly contributed to increase the economic growth of MENA while regulatory law is of
no significant. Based on this, ideal policy directions were highlighted.
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