Economic growth: Resource Curse Theory and Literature in OPEC and GCC countries

The main theory by which the resource curse is most critically explained is analyzed in this literature thoroughly. The negative relationship between the intensity of natural resources and the dependency of the growth of any economy or country considering other related variables constant is depicted in this literature.

Economic Growth and Non-renewable Natural Resource

According to Espinoza & Prasad (2012) economic growth actually implies the continuous expansion of the economy by means of the increase in the real GDP (Gross Domestic Product) of any economy. The increase in GDP is measured by the increase in national output over the national expenditure of any economy. According to Najam & Thrasher (2012) there are several macro-economic factors like rate of unemployment, rate of inflation, purchasing power of the individuals of the country etc. which are related to the economic growth of any economy. Another important factor which is related to the economic growth of a nation is the non-renewable natural resources of the economy and the OPEC and GCC countries are the very good examples of the dependency of the economic growth of any economy on its non-renewable natural resources (Oskenbayev, Yilmaz & Abdulla, 2013). According to Alexeev & Conrad (2011) shows that the natural resource abundance is not the sufficient condition for the economic prosperity of any economy. The empirical studies on the natural resource abundant countries like, Kuwait, Qatar etc. has shown a very poor economic growth rate than the other faster growing countries like Hong Kong, Japan, United Kingdom, Singapore etc. which are not natural resource abundant at all (Devlin, 2010). Moreover the non-renewable resources are much limited and so these non-renewable natural resource abundant countries face the Resource Curse problem which hampers the economic growth of these countries.

The Resource Curse Theory

The Resource Curse Theory explains about paradoxical situation of the non-renewable resource abundant countries where these countries face the negative growth of the economy or the stagnant growth condition of the economy which leads to several side effects on different macroeconomic factors of the economy (Eriksson, 2013). The resource curse in any economy ensues when the focus of the country becomes central oriented in a particular industry, like mining neglecting other sector of the economy. The result of this situation brings extreme volatility in the overall gross domestic product of the economy. The further political drawback of the resource curse is government corruption because of the improper resource rights, the unequal income distribution framework and the unfair regulation of the industry established in the overall society (GHANA: Avoiding the Resource Curse, 2010).

The Dutch Disease, a situation of Netherland, related to the large natural gas found in the country is a very good example of Recourse Curse (Loayza, Loayza, Rigolini & Alfredo, 2013). The literature of Lartey (2011) on Dutch Disease is going to be explained briefly and step by step in order to explain the Resource Curse Theory. Netherland had discovered an ample of reserves of natural gas, the large Groningen Natural Gas Field, in the year of 1959. Therefore, the economic focus of the country had started to be centralised on the gas industry of the economy as because there was a possibility of generation of high-income in that particular industry in the upcoming years. The natural gas industry was going to flourish and a bulk of skilled labours was emerging in this sector from the other sectors of the economy with the expectation of growth and opportunity (Andeweg, 2000). The labours of this sector were paid higher wages which resulted into the less competitive currency of the nation. As a consequence other industries, specially the manufacturing industry of Netherland had started to be hampered. This resource curse phenomenon had shown a negative impact on the growth of the economy following the discovery of the non-renewable natural resource reserves of the economy (Deng, Ma & Cao, 2014).

Resource Curse Theory and The Economic Growth in OPEC and GCC countries

A very surprising economic phenomenon is the economic growth of the resource poor economies is vast in all dimension than the resource rich economies (Murshed & Serino, 2011). A research study of Mehlum, Moene & Torvik (2006) has explained that the GDP growth of the countries which are based on the export of natural resources are much slower than the GDP growth of other countries which are not dependent on the export of natural resources in last twenty years. The studies of pure Growth Economics on the oil exporting countries like, Iraq, Iran, Kuwait, Qatar, Saudi Arabia etc. clearly explains that there are several variable factors which are controlling the economic growth of any country in both directions but the abundance of natural resources have the negative relationship with the economic growth of the economies considering other factors remaining constant (Árvai, Prasad & Katayama, 2014).

The negative association between the growth of OPEC and GCC countries and the abundance of natural resources is a conceptual puzzle because the natural resources bid up the purchasing power of the countries over imports and also increase the wealth of the nation through the boost in investment (Moradbeigi & Law, 2014). A big push in industrial development can be conducted with the use of revenues of the exported natural resources (oil) to finance diversified investments and according to the Venezuelans this strategy is known as “sowing the seeds of oil revenues” (Brollo, Nannicini, Perotti & Tabellini, 2013). Therefore, in this overview it can be clearly concluded with the reference of Williams (2011) that there will be always a disadvantage of the abundance of natural resources if the other factors which are commonly used in all the sectors of any economy is not used properly in a balanced way.


In this above overview on the OPEC and GCC countries the negative association between the economic growth and the natural resource intensity in examined critically. Taking the assistance of the concept of Brollo (2010) the economics of short run fluctuation is followed in this analysis and some other factors like, human capital accumulation rates, investment rates, government policies, terms of trade volatility etc. are considered to be ineffective to accelerate the economic growth. Therefore, this literature suggests that the disappointing performance of some political and economic factors which are unable to protect the economy from the reverse of intensity of non-renewable natural resources on the structure of growth in OPEC and GCC countries (Marcus, 1992).




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Árvai, Z., Prasad, A., & Katayama, K. (2014). Macroprudential policy in the GCC countries. [Washington, D.C.]: International Monetary Fund.

Devlin, J. (2010). Challenges of economic development in the Middle East and North Africa region. Singapore: World Scientific.

Espinoza, R., & Prasad, A. (2012). Monetary policy transmission in the GCC countries. [Washington, D.C.]: International Monetary Fund.

Marcus, A. (1992). Controversial issues in energy policy. Newbury Park, Calif.: Sage Publications.

Najam, A., & Thrasher, R. (2012). The future of south-south economic relations. London: Zed Books.

Brollo, F. (2010). The political resource curse. Cambridge, Mass.: National Bureau of Economic Research.

Deacon, R. (2011). The political economy of the natural resource curse. Boston: Now.

Eriksson, C. (2013). Economic growth and the environment. Oxford: Oxford University Press.

Loayza, N., Loayza, N., Rigolini, J., & Alfredo Mier y Teran.,. (2013). Poverty, Inequality, and the Local Natural Resource Curse. Washington, D.C.: The World Bank.



Andeweg, R. (2000). From Dutch disease to Dutch model? Consensus government in practice. Parliamentary Affairs53(4), 697-709. doi:10.1093/pa/53.4.697

Lartey, E. (2011). Financial Openness and the Dutch Disease. Review Of Development Economics15(3), 556-568. doi:10.1111/j.1467-9361.2011.00627.x

Alexeev, M., & Conrad, R. (2011). The natural resource curse and economic transition. Economic Systems35(4), 445-461. doi:10.1016/j.ecosys.2010.10.003

Brollo, F., Nannicini, T., Perotti, R., & Tabellini, G. (2013). The Political Resource Curse. American Economic Review103(5), 1759-1796. doi:10.1257/aer.103.5.1759

Deng, T., Ma, M., & Cao, J. (2014). Tourism resource development and long-term economic growth: a resource curse hypothesis approach. Tourism Economics20(5), 923-938. doi:10.5367/te.2013.0325

GHANA: Avoiding the Resource Curse. (2010). Africa Research Bulletin: Economic, Financial And Technical Series47(1), 18543A-18544C. doi:10.1111/j.1467-6346.2010.03061.x

Mehlum, H., Moene, K., & Torvik, R. (2006). Institutions and the Resource Curse*. Economic Journal116(508), 1-20. doi:10.1111/j.1468-0297.2006.01045.x

Moradbeigi, M., & Law, S. (2014). Economic Growth Volatility and Resource Curse: The Role of Financial Development. Taylor's Bus Rev4(2). doi:10.7603/s40932-014-0003-y

Murshed, S., & Serino, L. (2011). The pattern of specialization and economic growth: The resource curse hypothesis revisited. Structural Change And Economic Dynamics22(2), 151-161. doi:10.1016/j.strueco.2010.12.004

Oskenbayev, Y., Yilmaz, M., & Abdulla, K. (2013). Resource concentration, institutional quality and the natural resource curse. Economic Systems37(2), 254-270. doi:10.1016/j.ecosys.2012.11.001

Williams, A. (2011). Shining a Light on the Resource Curse: An Empirical Analysis of the Relationship Between Natural Resources, Transparency, and Economic Growth. World Development39(4), 490-505. doi:10.1016/j.worlddev.2010.08.015

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