Natural Resource Abundance، Dutch Disease and Economic Growth in Oil Economies

A Growing literature deals with an increasing number of aspects of the resource curse. One of the main areas of active research is Dutch Disease، which refers to a situation when a booming export sector increases the relative price of non-tradable goods and services، thus hurting the rest of tradable goods sector. In this study we investigate the relationship between natural resource abundance، Dutch Disease and economic growth in major petroleum exporters by using panel data for the period 1960 to 2008. The findings show that the negative effect of natural resource abundance and deficiency of institutional factors on economic growth remains after controlling for other variables such as physical investment، openness، government expenditure and changes in terms of trade that are important in a growth model. The main findings of this study show that natural resource abundance tends to increase the growth of service sector value added and the ratio of service value added to manufacturing value added in GDP and decrease the growth of manufacturing value added and share of manufacturing exports in total exports. To the extent that the service sector proxies the non-tradable sector and manufacturing the non-resource tradable sector، this provides some corroboration of the predictions of the Dutch Disease. The findings also show that the growth of manufacturing value added، changes in the share of manufacturing exports in total exports and the ratio of value added of manufacturing to services are positively correlated with economic growth. Given the direct relationship of these variables with economic growth، we can conclude that natural resource abundance، combined with structural weaknesses، leads to weakening of the industrial sector as a tradable sector and reduces industrial exports، thus lowering the growth rate of these countries. We can minimize such negative impact by minimizing exports of raw materials، as well as share of such revenues in the public budget، supporting non-oil sectors and creating modalities such as oil stabilization and reserve funds.