The Role of Institutional Quality on Relationship between Resource Abundance and Economic Growth in Oil Economies

This paper investigates the effects of natural resource abundance on economic growth، taking the role of institutional quality into consideration. For this purpose، the effects of institutional quality، such as government effectiveness، control of corruption، voice & accountability and rule of law، along with resource abundance on economic growth in major oil economies، have been studied by using panel data technique over the period (1996-2010). The empirical results indicate that institutional quality، in these countries، has a significant positive effect on economic growth، while resource abundance inversely affects the economic growth. Besides، natural resource abundance has reduced institutional quality. So، natural resource abundance with poor institutional quality، pushing the country into a vicious circle، has reduced further the economic growth. The key recommendation is to transform the oil revenue management model for enhancing institutional quality and، consequently، getting out of the vicious circle، in order to expedite and achieve sustainable economic growth.