Aggregate and disaggregate impact of natural resources on sustainable development: New evidence from the latest institutional data

Abstract

The aim of this study is to investigate the impact of institutional quality (IQ) and natural resources (NR) on sustainable development (SD) in 107 developing countries, using instrumental variable-generalized method of moment (IV-GMM) method. The study finds that NR tends to impede SD in developing countries, especially in resource-rich nations where NR is a significant component of national wealth. However, the impact of NR on SD varies depending on the type of resource. Point resources have a negative effect on SD, while diffuse resources do not show a significant impact. The study also provides evidence supporting the conditionalist view of the resource curse, demonstrating that higher IQ can mitigate the negative effects of NR on SD. The study establishes a threshold IQ value that must be met to transform the resource curse into a blessing. Conversely, a decline in IQ may lead to a resurgence of the resource curse and a decline in productive asset investment. Based on these findings, policymakers must carefully consider the type of NR being exploited to develop policies that are tailored to the unique characteristics of each resource type. This will help them to optimize resource exploitation while minimizing negative impacts on society and the environment.

Keywords

• Institutional quality
• Natural resources
• Sustainable development
• Developing countries
• Multiple imputation
• IV/GMM method