Natural Resources and Development: A Panel Analysis Identifying the Transmission Channels

Natural resources like oil have an enabling or constraining impact on how societies develop through a variety of mediating pathways. The goal of the study was to investigate the role of mediating social mechanisms in the transmission of the causal effects of natural resources on the development of societies and to ascertain the relative contribution of each of these channels in light of the research gap in the field of mediating social mechanisms. This study was carried out using the panel analysis method with data from 133 countries from 2000 to 2013. The results show that the direct impact of natural resources on development is eliminated by the introduction of transmission channels. This means that natural resources mainly play their causal role indirectly. The results also demonstrated that natural resources affect the development level of societies via the social channels of human capital, institutional quality, and the level of social stability. The most significant social channel through which natural resources influence the development of countries is human capital. The deterioration of the human capital structure is the most significant channel of the unfavorable developmental consequences of the countries that are endowed with or dependent upon natural resources; consequences that can be averted with appropriate policies.