Do natural resources impact economic growth: An investigation of P5 + 1 countries under sustainable management
Abstract
Natural resources represent the base of our living and the entire economic activity. Their depletion is a major challenge for the economic development of both developed and developing economies. Their efficient use is an indispensable requirement and must be the aim of the public policies designed by the authorities worldwide. In this research, we have investigated the impact of the natural resources rent on the economic growth in some major wealthy economies of the world (P5 + 1 countries namely: US, UK, France, China, Russia, and Germany). We have applied a quantile-on-quantile regression to analyse this impact on different quantiles and a cross-sectional autoregressive distributed lag (CS-ARDL) approach for the panel of these six countries. The Dumitrescu-Hurlin panel causality test was also used to check the causality between natural resource rents and economic growth in these countries. Results show a negative relationship between natural resources rent and economic growth for the panel but a different impact on quantiles in each country. Only for China and the US, a positive effect can be noticed for both lower and higher quantiles of natural resources and economic growth. The Dumitrescu-Hurlin causality test shows that natural resources can predict economic growth only in China, the U.S., and the panel. In contrast, no causality was found for the other four countries included in the panel. We suggest that nations invest in wind and solar projects, use biofuels and nuclear energy, introduce a temporary profit tax to protect consumers from escalating energy prices, and increase energy efficiency in buildings and industry. Businesses would benefit from a regulatory framework that is uniform and exhaustive, as well as easier to traverse and more receptive to innovation and creativity. Public-private partnership investments in innovation, innovation incentives, and environmental sector opportunities may foster long-term economic growth.