Natural resources, economic globalization, and sustainable development: Can economic complexity and environmental regulations cure the resource curse?
Abstract
Abstract The abundance of natural resources (NRR) is often regarded as a double‐edged sword, with the potential to promote or hinder sustainable development. Nevertheless, it is imperative to effectively manage the resources to ensure their sustainability and minimize their detrimental economic and environmental effects. Environmental regulations of nations and a structural shift towards more advanced and knowledge‐intensive modes of production can substantially contribute to this objective. Using a holistic index of sustainable development, this study aims to explore the interplay between NRR, economic complexity (ECI), environmental regulations, economic globalization, and sustainable development in 25 European Union (EU) countries from 1995 to 2019. The empirical results from the Method of Moments Quantile Regression (MM‐QR) reveal a negative relationship between NRR and sustainable development, supporting the hypothesis of the resource curse. Conversely, the study demonstrates that ECI and environmental regulations drive sustainable development. Furthermore, economic globalization is found to have a detrimental effect on sustainable development. Finally, panel causality results revealed causal links from NRR, ECI, and environmental regulations to sustainable development. Meanwhile, ECI and environmental regulations have a causal impact on NRR. Our key findings lead towards the manifestation and emphasis of the importance of appropriate policies for the sustainable utilization of NRR and, concurrently, underscore the significance of environmental regulations and ECI in the pursuit of sustainable development in EU countries.