Natural Resources and FDI in GCC Countries
Keywords:Economic growth, endogeneity, FDI, GCC region, natural resources, panel data.
AbstractNatural resources are a blessing for some countries to attract FDI but cursed for others. Existing literature argues the suggestion that resource-rich countries attract less FDI because of resource (oil) price volatility. This study examines that natural resources discourage FDI in GCC countries (the FDI-Natural resources curse hypothesis), using panel data analysis for six oil dependent countries during 1980-2013 and applying several econometrics techniques. The main findings of this paper is that natural resources measured by oil rents have a negative association with FDI inflows; this negative impact is robust even when other FDI determinates of FDI are included. FDI inflows decreased between 0.15 and 0.92% when oil rents increased by 1%. In addition, the empirical results show that trade openness and labour force are the main factors that encourage FDI, while political instability and corruption deter FDI inflows into GCC countries.
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