How natural resources shape the industrial development: Evidence from N-10 countries
DOI:
https://doi.org/10.18196/jesp.v26i1.25605Keywords:
Industrialization, Natural Resource Curse, Economic GrowthAbstract
This study analyzes the effect of natural resources on the manufacturing industry. It aims to fill the gap in the research on the impact of natural resources on industrial productivity since there is very limited literature on such a topic, particularly in the Next Eleven countries (N-11), excluding South Korea (referred to as the N-10 countries). South Korea is not included as a sample because it does not have many natural resources. The N-10 countries (Vietnam, Turkey, Philippines, Pakistan, Nigeria, Mexico, Iran, Indonesia, Egypt, and Bangladesh) have a large population, rapid economic growth, and political and economic stability. The Generalized Method of Moments (GMM) is implemented using data panels of the N-10 countries with natural resources from 2015 to 2021. This study confirms that the resource curse exists, as evidenced by the detrimental effects of abundant natural resources on industrial productivity. Empirical findings have also documented a significantly adverse impact of corruption practices in the manufacturing sector. Meanwhile, capital and trade openness should be further improved to encourage value-added industries. Based on the results of this study, the N-10 countries are recommended to diversify their economies, reduce reliance on natural resources, and strengthen the control of corruption.
References
Alssadek, M., & Benhin, J. (2021). Oil boom, exchange rate and sectoral output: An empirical analysis of Dutch disease in oil-rich countries. Resources Policy, 74(February), 102362. https://doi.org/10.1016/j.resourpol.2021.102362
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
Auty, R. M. (1994). Industrial policy reform in six large newly industrializing countries: The resource curse thesis. World Development, 22(1), 11–26. https://doi.org/10.1016/0305-750X(94)90165-1
Badeeb, R. A., Lean, H. H., & Clark, J. (2017). The evolution of the natural resource curse thesis: A critical literature survey. Resources Policy, 51(October 2016), 123–134. https://doi.org/10.1016/j.resourpol.2016.10.015
Bahar, D., & Santos, M. A. (2018). One more resource curse: Dutch disease and export concentration. Journal of Development Economics, 132(January), 102–114. https://doi.org/10.1016/j.jdeveco.2018.01.002
Blundell, R., & Bond, S. (2023). Reprint of: Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 234, 38–55. https://doi.org/10.1016/j.jeconom.2023.03.001
Boschini, A., Pettersson, J., & Roine, J. (2013). The Resource Curse and its Potential Reversal. World Development, 43, 19–41. https://doi.org/10.1016/j.worlddev.2012.10.007
Brunnschweiler, C. N., & Bulte, E. H. (2008). The resource curse revisited and revised: A tale of paradoxes and red herrings. Journal of Environmental Economics and Management, 55(3), 248–264. https://doi.org/10.1016/j.jeem.2007.08.004
Cavalcanti, T. V. de V., Mohaddes, K., & Raissi, M. (2011). Growth, development and natural resources: New evidence using a heterogeneous panel analysis. Quarterly Review of Economics and Finance, 51(4), 305–318. https://doi.org/10.1016/j.qref.2011.07.007
Corden, W. M., & Neary, J. P. (1982). Booming De-Industrialisation Economy * In A Small O P E N. 92(December), 825–848.
Davis, G. A., & Tilton, J. E. (2005). Davis & Tilton 2005.
Dietz, S., Neumayer, E., & De Soysa, I. (2007). Corruption, the resource curse and genuine saving. Environment and Development Economics, 12(1), 33–53. https://doi.org/10.1017/S1355770X06003378
Dodzin, S., & Vamvakidis, A. (2004). Trade and industrialization in developing economies. Journal of Development Economics, 75(1), 319–328. https://doi.org/10.1016/j.jdeveco.2003.08.006
Erdoğan, S., Yıldırım, D. Ç., & Gedikli, A. (2020). Natural resource abundance, financial development and economic growth: An investigation on Next-11 countries. Resources Policy, 65(December 2019). https://doi.org/10.1016/j.resourpol.2019.101559
Eregha, P. B., & Mesagan, E. P. (2016). Oil resource abundance, institutions and growth: Evidence from oil producing African countries. Journal of Policy Modeling, 38(3), 603–619. https://doi.org/10.1016/j.jpolmod.2016.03.013
Erumban, A. A., Das, D. K., Aggarwal, S., & Das, P. C. (2019). Structural change and economic growth in India. Structural Change and Economic Dynamics, 51, 186–202. https://doi.org/10.1016/j.strueco.2019.07.006
Gylfason, T. (2002). Banco Central de Chile Documentos de Trabajo Central Bank of Chile Working Papers Natural Resources and Economic Growth : The Role of Investment.
Haggard, S., & Tiede, L. (2011). The Rule of Law and Economic Growth: Where are We? World Development, 39(5), 673–685. https://doi.org/10.1016/j.worlddev.2010.10.007
Havranek, T., Horvath, R., & Zeynalov, A. (2016). Natural Resources and Economic Growth: A Meta-Analysis. World Development, 88(609642), 134–151. https://doi.org/10.1016/j.worlddev.2016.07.016
Henri, P. A. O. (2019). Natural resources curse: A reality in Africa. Resources Policy, 63(January). https://doi.org/10.1016/j.resourpol.2019.101406
Hidalgo, C. A., & Hausmann, R. (2009). The building blocks of economic complexity. Proceedings of the National Academy of Sciences of the United States of America, 106(26), 10570–10575. https://doi.org/10.1073/pnas.0900943106
Iimi, A. (2007). Escaping from the resource curse: Evidence from Botswana and the rest of the world. IMF Staff Papers, 54(4), 663–699. https://doi.org/10.1057/palgrave.imfsp.9450020
Jena, D. (2021). International trade, structural transformation and economic catch-up: An analysis of the asean experiences. Journal of Economic Development, 46(3), 133–153.
Kuncoro, A. (2006). Corruption and Business Uncertainty in Indonesia. Asean Economic Bulletin, 23(1), 11–30. https://doi.org/10.1355/ae23-1b
Lashitew, A. A., Ross, M. L., & Werker, E. (2021). What Drives Successful Economic Diversification in Resource-Rich Countries? World Bank Research Observer, 36(2), 164–196. https://doi.org/10.1093/wbro/lkaa001
Li, Y., Naqvi, B., Caglar, E., & Chu, C. C. (2020). N-11 countries: Are the new victims of resource-curse? Resources Policy, 67(April), 101697. https://doi.org/10.1016/j.resourpol.2020.101697
Mesagan, E. P., & Bello, M. O. (2018). Core infrastructure and industrial performance in Africa: Do institutions matter? International Review of Economics, 65(4), 539–562. https://doi.org/10.1007/s12232-018-0314-y
Mesagan, E. P., Charles, A. O., & Vo, X. V. (2023). The relevance of resource wealth in output growth and industrial development in Africa. Resources Policy, 82(March), 103517. https://doi.org/10.1016/j.resourpol.2023.103517
Muhammad, T., Ni, G., Chen, Z., Mallek, S., Dudek, M., & Mentel, G. (2024). Addressing resource curse: How mineral resources influence industrial structure dynamics of the BRI 57 oil-exporting countries. Resources Policy, 99(May). https://doi.org/10.1016/j.resourpol.2024.105420
Nkemgha, G., Engone Mve, S., Balouki Mikala, H., & Tékam, H. (2022). Linking natural resource dependence and industrialization in sub-Saharan African countries. International Review of Applied Economics, 36(2), 245–263. https://doi.org/10.1080/02692171.2021.1957786
Nzeh Innocent, C., Uzoechina, B. I., Eze, M. A., Imoagwu, C. P., & Anyachebelu, U. M. (2021). Manufacturing Sector Performance and Natural Resources Endowment: Evidence from Natural Resource-rich Sub-Saharan African Countries. International Journal of Economics Development Research (IJEDR), 2(3), 186–203. https://doi.org/10.37385/ijedr.v2i3.283
Papyrakis, E., & Gerlagh, R. (2007). Resource abundance and economic growth in the United States. European Economic Review, 51(4), 1011–1039. https://doi.org/10.1016/j.euroecorev.2006.04.001
Pasaribu, D. H. (2020). Testing the Dutch disease: The impact of natural resources extraction on the manufacturing sector. 17.
Rahim, S., Murshed, M., Umarbeyli, S., Kirikkaleli, D., Ahmad, M., Tufail, M., & Wahab, S. (2021). Do natural resources abundance and human capital development promote economic growth? A study on the resource curse hypothesis in Next Eleven countries. Resources, Environment and Sustainability, 4(December 2020), 100018. https://doi.org/10.1016/j.resenv.2021.100018
Rahma, H., Fauzi, A., Juanda, B., & Widjojanto, B. (2021). Fenomena Natural Resource Curse dalam Pembangunan Wilayah di Indonesia. Jurnal Ekonomi Dan Pembangunan Indonesia, 21(2), 148–163. https://doi.org/10.21002/jepi.2021.10
Rowthorn, R., & Ramaswamy, R. (1999). Growth, trade, and deindustrialization. IMF Staff Papers, 46(1), 18–41. https://doi.org/10.5089/9781451848021.001
Sachs, J., & Warner, A. (1995). Natural Reaource Abundance and Econmic Growth. National Bureau of Economic Research, 3, 54.
Sala-i-Martin, X., & Subramanian, A. (2013). Addressing the natural resource curse: An illustration from Nigeria. Journal of African Economies, 22(4), 570–615. https://doi.org/10.1093/jae/ejs033
Shimada, G. (2016). The Economic Implications of a Comprehensive Approach to Learning on Industrial Policy. Industrial Policy and Economic Transformation in Africa, 102–122. https://doi.org/10.7312/columbia/9780231175180.003.0004
Signé, L. (2018). The potential of manufacturing and industrialization in Africa: Trends, opportunities, and strategies. Africa Growth Initiative at Brookings, September, 1–32.
Stiglitz, J. E. (2017). the Revolution of Information Economics : Nber Working Paper Series, 23780, 28.
Tabash, M. I., Mesagan, E. P., & Farooq, U. (2022). Dynamic linkage between natural resources, economic complexity, and economic growth: Empirical evidence from Africa. Resources Policy, 78(June), 102865. https://doi.org/10.1016/j.resourpol.2022.102865
van der Ploeg, F., & Poelhekke, S. (2009). Volatility and the natural resource curse. Oxford Economic Papers, 61(4), 727–760. https://doi.org/10.1093/oep/gpp027
Wang, D., Wu, Y., & Zhang, K. (2022). Interplay of Resources and Institutions in Improving Organizational Resilience of Construction Projects: A Dynamic Perspective. EMJ - Engineering Management Journal, 35(4), 346–357. https://doi.org/10.1080/10429247.2022.2116891
Xu, H., Jilenga, M. T., & Deng, Y. (2019). Institutional Quality, Resource Endowment, and Economic Growth: Evidence from Cross-Country Data. Emerging Markets Finance and Trade, 55(8), 1754–1775. https://doi.org/10.1080/1540496X.2018.1496418
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Reza Pahlevi Chairul
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
License
You are free to:
- Share — copy and redistribute the material in any medium or format
- Adapt — remix, transform, and build upon the material for any purpose, even commercially.
The licensor cannot revoke these freedoms as long as you follow the license terms.
Under the following terms:
- Attribution — You must give appropriate credit, provide a link to the license, and indicate if changes were made. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
- ShareAlike — If you remix, transform, or build upon the material, you must distribute your contributions under the same license as the original.
- No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
