International Trade Openness, Resource Abundance and Economic Growth Nexus: A Panel Data Analysis of Resource Rich Countries

Employing panel data techniques with a focus on the Feasible Generalized Least Squares (FGLS) estimator to correct for the serially correlated errors and heteroscedasticity presence, I analyzed data for the period 1987-2017 folded in non-overlapping five-year intervals to ascertain and reassess the nexus that exist between trade and growth, and resource abundance and growth in a particular setting of 47 resource-intensive countries against the backdrop of Davido Ricardo’s comparative advantage law. I showed that, by integrating control variables such as the initial level of income per capita, macroeconomic stability, institutional quality capital, industrial value added, amongst others, conclusions from existing studies are still robust even with more recent data. Indeed, it has been found that a positive interplay exists between trade openness and economic growth, however, higher exports of natural resources or increases in resource rents are associated with lower annual growth rates of GDP per capita, that is to say, an inverse nexus between natural resource abundance and economic growth variables. This finding confirmed the resource curse theory, a paradox conflicting with the comparative advantage idea.