To achieve high levels of well-being, the world adopted the Sustainable Development Goals (SDGs) in 2015. Specifically, the SDG 8 i.e., decent work and economic growth is directly linked with attaining a high level of economic growth, while several other goals (e.g., no poverty (SDG 1), zero hunger (SDG 2), and quality education (SDG 4), among others) are indirectly related to a high level of economic growth. Thus, the world has continued to seek avenues to escalate sustainable economic growth through the aspects of SDGs.
It is generally believed that natural resources (e.g., oil and gas, among others) are the backbone of economic activity since they are input factors and primary drivers of GDP and economic development. However, it is observed that several countries (e.g., African countries) with abundant natural resources have low per capita income compared to resource-poor countries (e.g., Japan, Singapore, Taiwan, Norway, Australia, etc.). This is referred to as “resource curse hypothesis”. Hence, researchers curiously started exploring the natural resources-economic growth nexus.
In this paper we revisit the natural resource curse hypothesis at the global level as compared to the literature that used a single country (e.g., the US, China, etc.) or a group of countries (e.g., ASEAN region, BRICS, G7 countries, etc.). In addition, this study tests the resource curse hypothesis amidst geopolitical risk by using global data. We adopt the novel Fourier augmented autoregressive distributed lag (ARDL) approach for robust empirical analysis.
The findings claim that natural resources promote economic growth, thus, invalidating the resource curse hypothesis. However, the interaction of natural resources and geopolitical risk hinders economic growth, thus validating the natural resource curse hypothesis as induced by geopolitical conflicts. Moreover, the findings show that capital stock and technological innovation promote global economic output. These findings suggest that proactive measures that potentially minimize geopolitical risk are vital for the prevention of the natural resource curse.