The Resource Curses Hypothesis and The Effect of Trade Openness in The Iranian Economy: An ARDL Bounds Testing Approach

Year 2025, Volume: 9 Issue: 1, 55 - 77, 24.06.2025

Ömer Doru

https://doi.org/10.33201/iranian.1570655

Abstract

This study aims to examine the validity of the resource curse hypothesis and the impact of trade openness on economic growth in the Iranian economy. Despite possessing substantial natural resource reserves, the Iranian economy has struggled to achieve satisfactory economic growth performance. The core motivation of this study is to address Iran's growth challenges within the framework of the resource curse hypothesis and to investigate whether trade openness mitigates this phenomenon. The research relies on annual data spanning the period from 1990 to 2021. Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the study confirms the existence of a co-integration relationship among the variables. The results reveal that natural resource rents exert a negative and statistically significant long-term effect on economic growth, thus validating the resource curse hypothesis in the Iranian context. In contrast, trade openness has a positive long-term impact on economic growth, suggesting that foreign trade can mitigate the adverse effects of the resource curse. Additionally, real gross fixed capital investment significantly and positively contributes to economic growth. According to the error correction model, short-term deviations from equilibrium are corrected over time, restoring balance in the long run. These findings underscore the role of trade openness in fostering economic growth by reducing Iran's dependence on natural resources and transforming resource wealth from a curse into a blessing. This study highlights the critical role of trade openness in optimizing the economic benefits of Iran's abundant natural resource reserves and makes a unique contribution to the literature.

Keywords

Resource Curse , Trade Openness , Economic Growth , Iranian Economy , ARDL Bounds Test.

İran Ekonomisinde Kaynak Laneti Hipotezi ve Ticari Açıklığın Etkisi: ARDL Sınır Testi Yaklaşımı

Abstract

Bu çalışma, İran ekonomisinde kaynak laneti hipotezinin geçerliliği ve ticari açıklığın ekonomik büyüme üzerindeki etkisini incelemeyi amaçlamaktadır. İran ekonomisi, önemli doğal kaynak rezervlerine sahip olmasına rağmen yeterli ekonomik büyüme performansı gösterememektedir. İran ekonomisinin büyüme sorununu kaynak laneti hipotezi çerçevesinde açıklamak ve ticari açıklığın bu olguyu dışlayıp dışlamadığını belirlemek çalışmanın motivasyonunu ortaya koymaktadır. Araştırma, 1990-2021 dönemine ait yıllık verilere dayanmaktadır. Kurulan Gecikmesi Dağıtılmış Otoregresif (ARDL) sınır testi modeli sonuçları, değişkenler arasında eş-bütünleşme ilişkisinin varlığını doğrulamaktadır. Elde edilen bulgular, doğal kaynak kirası değişkeninin uzun dönemde ekonomik büyüme üzerinde negatif ve istatistiksel olarak anlamlı bir etkisinin olduğunu, dolayısıyla İran ekonomisinde kaynak laneti hipotezinin geçerli olduğunu göstermektedir. Ticari açıklık değişkeni ise uzun dönemde ekonomik büyümeyi pozitif yönde etkileyerek dış ticaretin kaynak lanetinin etkilerini hafifletebileceğine işaret etmektedir. Aynı zamanda reel gayrisafi sabit sermaye yatırımları değişkeni de ekonomik büyüme üzerinde pozitif ve anlamlı bir etki yaratmaktadır. Hata düzeltme modeline göre, modelde kısa dönemde oluşan sapmaların uzun dönemde telafi edildiği ve tekrar dengeye ulaşıldığı görülmüştür. Bulgular, ticari açıklığın, İran ekonomisinin doğal kaynak bağımlılığını azaltarak ekonomik büyümeyi destekleyebileceğini ve doğal kaynak zenginliğini bir lanet olmaktan çıkarıp bir nimet haline dönüştürebileceğini göstermektedir. Bu çalışma, İran’ın bol doğal kaynak rezervlerinin ekonomik büyümeye olan katkısını optimize etmek için ticari açıklığın oynayabileceği rolü vurgulamakta ve literatüre özgün bir katkı sunmaktadır.

Keywords

Kaynak Laneti , Ticari Açıklık , Ekonomik Büyüme , İran Ekonomisi , ARDL Sınır Testi.

References

• Ahmed, K., Mahalik, M. K., & Shahbaz, M. (2016). Dynamics between economic growth, labor, capital and natural resource abundance in Iran: An application of the combined cointegration approach. Resources Policy, 49, 213-221. https://doi.org/10.1016/j.resourpol.2016.06.005
• Alexeev, M. & Conrad, R. (2009). The elusive curse of oil. The review of Economics and Statistics, 91(3), 586-598. https://doi.org/10.1162/rest.91.3.586
• Alssadek, M., & Benhin, J. (2023). Natural resource curse: A literature survey and comparative assessment of regional groupings of oil-rich countries. Resources Policy, 84. https://doi.org/10.1016/j.resourpol.2023.103741
• Ampofo, G. K. M., Cheng, J., Asante, D. A. ve Bosah, P. (2020). Total natural resource rents, trade openness and economic growth in the top mineral-rich countries: New evidence from nonlinear and asymmetric analysis. Resources Policy, 68. https://doi.org/10.1016/j.resourpol.2020.101710
• Apergis, N. & Payne, J. E. (2014). The oil curse, institutional quality, and growth in MENA countries: Evidence from time-varying cointegration. Energy Economics, 46, 1-9. https://doi.org/10.1016/j.eneco.2014.08.026
• Arezki, R. & Van der Ploeg, F. (2011). Do natural resources depress income per capita?. Review of Development Economics, 15(3), 504-521. https://doi.org/10.1111/j.1467-9361.2011.00623.x
• Auty, R. & Warhurst, A. (1993). Sustainable development in mineral exporting economies. Resources Policy, 19(1), 14-29. https://doi.org/10.1016/0301-4207(93)90049-S
• Auty, R. (1993). Sustaining development in mineral economies: the resource curse thesis, Routledge. https://doi.org/10.4324/9780203422595
• Balassa, B. A. (1980). The process of industrial development and alternative development strategies (Working Paper No. 141). World Bank. http://documents.worldbank.org/curated/en/575571468739193023/The-process-of-industrial-development-and-alternative-development-strategies
• Belaid, F., Dagher, L. & Filis, G. (2021). Revisiting the resource curse in the MENA region. Resources Policy, 73. https://doi.org/10.1016/j.resourpol.2021.102225
• Cavalcanti, T.V.D.V., Mohaddes, K. & Raissi, M. (2011). Growth, development and natural resources: New evidence using a heterogeneous panel analysis. The Quarterly Review of Economics and Finance, 51(4), 305-318. https://doi.org/10.1016/j.qref.2011.07.007
• Corden, W. M., and Neary, J. P. (1982). Booming sector and de-industrialisation in a small open economy. The Economic Journal, 92(368), 825-848. https://doi.org/10.4337/9781035334643.00029
• Dell’Anno, R., & Maddah, M. (2022). Natural resources, rent seeking and economic development. An analysis of the resource curse hypothesis for Iran. Macroeconomics and Finance in Emerging Market Economies, 15(1), 47-65.
• Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: Journal of The Econometric Society, 49(4), 1057-1072. https://doi.org/10.2307/1912517
• Doru, Ö., & Düşünceli, F. (2021). Türkiye’de ticari dışa açıklık ve enflasyon ilişkisi: ARDL sınır testi ve nedensellik analizi. Kafkas Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 12(23), 37-54. https://doi.org/10.36543/kauiibfd.2021.003
• Dou, S., Wang, X., Shi, J., & Sannah Gbolo, S. (2024). The role of trade openness and labour productivity on mineral rents: evidence from East Asian countries. Applied Economics, 1-12. https://doi.org/10.1080/00036846.2024.2342076
• Fan, R., Fang, Y. & Park, S. Y. (2012). Resource abundance and economic growth in China. China Economic Review, 23(3), 704-719. https://doi.org/10.1016/j.chieco.2012.04.007
• Frankel, J. A. (2012). The natural resource curse: A survey of diagnoses and some prescriptions. R. Arzeki ve Z. Min (Ed.), Commodity Price Volatility and Inclusive Growth in Low-Income Countries (s.7-34). IMF. https://www.elibrary.imf.org/display/book/9781616353797/ch002.xml
• Henry, A. (2019). Transmission channels of the resource curse in Africa: A time perspective. Economic Modelling, 82, 13-20. https://doi.org/10.1016/j.econmod.2019.05.022
• Kim, D. H., & Lin, S. C. (2017). Natural resources and economic development: new panel evidence. Environmental and resource economics, 66, 363-391. https://doi.org/10.1007/s10640-015-9954-5
• Li, C. & Gong, K. (2023). Does the resource curse hypothesis hold in China? Evaluating the role of trade liberalisation and gross capital formation. Resources Policy, 86, 103975. https://doi.org/10.1016/j.resourpol.2023.103975
• Majumder, M. K., Raghavan, M. & Vespignani, J. (2020). Oil curse, economic growth and trade openness. Energy Economics, 91. https://doi.org/10.1016/j.eneco.2020.104896
• Malik, M. A. & Masood, T. (2022). Analysing the impact of oil capital on economic growth in West Asia and North African countries. International Journal of Economic Policy in Emerging Economies, 16(1), 107-120. https://doi.org/10.1504/IJEPEE.2022.124656
• Matallah, S. (2020). Economic diversification in MENA oil exporters: Understanding the role of governance. Resources Policy, 66. https://doi.org/10.1016/j.resourpol.2020.101602
• Mobarak, A. & Karshenasan, A. (2012). The impact of institutional quality on relation between resource abundance and economic growth. Iranian Economic Review, 16(32), 95-110. https://doi.org/10.22059/ier.2012.32740
• Namahoro, J. P., Qiaosheng, W., & Hui, S. (2023). Economic growth, natural resource rents, and business openness nexus in regions and income levels of Africa: evidence from recent panel estimators. Mineral Economics, 36(4), 583-598. https://doi.org/10.1007/s13563-022-00362-y
• Nejati, M., & Bahmani, M. (2020). The economic impacts of foreign direct investment in oil and gas sector: A CGE analysis for Iranian economy. Energy strategy reviews, 32, 100579.
• Nurkse, R. (1952). Some international aspects of the problem of economic development. The American Economic Review, 42(2), 571-583. https://www.jstor.org/stable/1910629
• Ofori, P. E. & Grechyna, D. (2021). Remittances, natural resource rent and economic growth in Sub-Saharan Africa. Cogent Economics & Finance, 9(1) https://doi.org/10.1080/23322039.2021.1979305
• Omolade, A., & Ngalawa, H. (2014). Oil revenue and manufacturing sector growth in Africa's oil-exporting countries. Journal of Economic and Financial Sciences, 7(3), 925-944. https://hdl.handle.net/10520/EJC164668
• OPEC, Organization of the Petroleum Exporting Countries (2024). Annual Statistical Bulletin, https://publications.opec.org/asb
• Pan, K., Cheng, C., Kirikkaleli, D. & Genç, S. Y. (2021). Does financial risk and fiscal decentralization curb resources curse hypothesis in China? Analyzing the role of globalization. Resources Policy, 72. https://doi.org/10.1016/j.resourpol.2021.102020
• Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616
• Redmond, T. & Nasir, M. A. (2020). Role of natural resource abundance, international trade and financial development in the economic development of selected countries. Resources Policy, 66. https://doi.org/10.1016/j.resourpol.2020.101591
• Romer, D. (1996). Advanced Macroeconomics. McGraw-Hill.
• Rostow, W. W. (1959). The stages of economic growth. The Economic History Review, 12(1), 1-16. https://doi.org/10.2307/2591077
• Sachs, J.D. & Warner, A.M. (1995). Natural Resource Abundance and Economic Growth (Working Paper No. 5398). National Bureau of Economic Research. https://uwamicroeconomics.wordpress.com/wp-content/uploads/2013/04/natural-resource-abundance-and-economic-growth-sachs-and-warner-1997.pdf
• Smith, B. (2015). The resource curse exorcised: Evidence from a panel of countries. Journal of development economics, 116, 57-73. https://doi.org/10.1016/j.jdeveco.2015.04.001
• Wijnbergen, S. V. (1984). The Dutch disease': A disease after all?. The Economic Journal, 94(373), 41-55. https://doi.org/10.2307/2232214
• Vespignani, J., Raghavan, M., & Majumder, M. K. (2019). Oil curse, economic growth and trade openness. Globalization and Monetary Policy Institute Working Paper, (370).
• World Bank (2024). World development indicators. https://databank.worldbank.org/source/world-development-indicators
• Yaduma, N., Kortelainen, M. & Wossink, A. (2013). An investigation of oil curse in OECD and Non-OECD oil exporting economies using green measures of income. Economics Discussion Paper Series 1321, The University of Manchester. https://ideas.repec.org/p/man/sespap/1321.html
• Yang, Q. & Song, D. (2019). How does environmental regulation break the resource curse: Theoretical and empirical study on China. Resources Policy, 64. https://doi.org/10.1016/j.resourpol.2019.101480
• Yılancı, V., Turkmen, N. C. & Shah, M. I. (2022). An empirical investigation of resource curse hypothesis for cobalt. Resources Policy, 78. https://doi.org/10.1016/j.resourpol.2022.102843