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Natural resource revenues: Effect on the pattern of domestic investments relative to international assets investments

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  • Salim Araji

    (The United Nations-Economic and Social Commission for Western Asia)

Abstract

The question of interest in this essay is whether the presence of natural resource rents detracts from or contributes to domestic investments and economic diversification vis-à-vis international investments. In general, there is a positive relation between natural resource rents and domestic investments. However, evidence suggests that albeit resource-dependent economies are capital scarce, they tend to invest more in international markets proportional to domestic markets. We use a panel quantile regression to model the influence of natural resource revenues on the evolution of investments and precisely on the ratio of domestic capital investments relative to total international assets investments (Investment Pattern). Our results show that natural resource rents as percentage of GDP are negatively related to the ratio of domestic capital relative to foreign assets investments only in countries with resource rents per GDP above12.5%. Further, after adding an index for absorptive capacity, we confirm that in capital scarce economies, absorptive capacity plays an important role to bringing investments home at all quantiles of the investment patterns.

Suggested Citation

  • Salim Araji, 2018. "Natural resource revenues: Effect on the pattern of domestic investments relative to international assets investments," International Economics and Economic Policy, Springer, vol. 15(3), pages 661-682, July.
    • Handle: RePEc:kap:iecepo:v:15:y:2018:i:3:d:10.1007_s10368-017-0379-1
    DOI: 10.1007/s10368-017-0379-1
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    References listed on IDEAS

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    Cited by:

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    3. Zhang, Cong & Teng, Wei, 2023. "Natural resources led financing of investment: A prospect of China's provincial data," Resources Policy, Elsevier, vol. 86(PB).

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    More about this item

    Keywords

    International Economics; Economic growth; Natural resources Economics; Natural resource revenue management; Investment; Domestic investments;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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