Effect of institutional quality and wealth from oil revenue on economic growth in oil-exporting developing countries

Adewale Samuel Hassan, Daniel Francois Meyer, Sebastian Kot

Research output: Contribution to journalArticlepeer-review

37 Citations (Scopus)

Abstract

This article investigates the role of institutional quality in the oil wealth-economic growth nexus for 35 oil-exporting developing countries between 1984 and 2016. To achieve this objective, an empirical model was employed with linear interaction between oil wealth and institutional quality, and estimated by means of panel autoregressive distributed lag (ARDL) with a dynamic fixed effect estimator. From the results, a contingent effect of oil wealth on economic growth, both in the long run and in the short run, was established. Specifically, institutional quality was found to mitigate the negative effect of oil wealth on economic growth in the long run, while in the short run, institutional quality was found to enhance the positive effect of oil wealth on economic growth. Furthermore, the results provide the threshold levels of institutional quality, beyond which oil wealth enhances economic growth, both in the long run and in the short run, for the sampled countries. These results suggest that in order for oil-exporting developing countries to benefit from an increase in oil wealth, they must adopt appropriate policy measures to improve their levels of institutional quality and embed their entire oil wealth-generating mechanism in a sound institutional framework. Also of importance is that governments must ensure sustainable development through the benefits of wealth from oil.

Original languageEnglish
Article number3635
JournalSustainability
Volume11
Issue number13
DOIs
Publication statusPublished - 1 Jul 2019
Externally publishedYes

Keywords

  • Panel ARDL
  • Resource curse
  • Threshold

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Renewable Energy, Sustainability and the Environment
  • Environmental Science (miscellaneous)
  • Energy Engineering and Power Technology
  • Management, Monitoring, Policy and Law

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