Evaluation of the Role of Institutional Quality and Human Capital on the Resource Curse Hypothesis

Resent emprical studies indicate that natural resource abundance have an important role on economic growth in natural-resource-rich countries. Also according to literature on economic growth that human capital, education, technologcal progress and institutional quality are effective factors on economic growth. This essay using Dynamic Panel Data and GMM method, investigates the Resource Curse Hypothesis and then analyzes the rope of effective factors and their trace on RCH. Among several effective factors, in this paper we focus on Human Capital and Institutional Quality. Elected sample for this study is two groups of petroleum exporter's countries: A) Major petroleum exporters and B) Other petroleum exporters. The analysis for the period 1995-2008. Results indicate that Resource Curse is observed in major Petroleum Exporting Countries. Results confirm the importance of low institutional quality and inadequate investments on human capital in the occurrence of a resource curse. Therefore our finding confirm natural resource abundance may have a negative impact on growth occurs if considered in isolation, but a positive direct impact on growth if other explanatory variables, such as human capital, institutional quality, openness and etc, are also studied.