The Linkage between the Oil and Non-oil Sectors : A Panel VAR Approach

Author/Editor:

Nir Klein

Publication Date:

May 1, 2010

Electronic Access:

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Summary:

Recent empirical studies have shown an inverse relation between natural resource intensity and long-term growth, implying that the natural resources generally impede economic growth through various channels (the “natural resource curse”). This paper departs from these studies by exploring the intersectoral linkages between oil and non-oil sectors in a cross-country perspective. The paper shows that the applicability of “natural resource curse” across oilbased economies should be treated with caution as the externalities of the oil sector highly depend on the countries’ degree of oil-intensity. In particular, the results show that, in low oil-intensity economies, the incentives to strengthen both fiscal and private sector institutions lead to positive inter-sectoral externalities. In contrast, weaker incentives in high oil-intensity economies adversely affect fiscal and private sector institutions and consequently lead to negative inter-sectoral externalities.

Series:

Working Paper No. 10/118

Subject:

English

Publication Date:

May 1, 2010

ISBN/ISSN:

9781455200771/1018-5941

Stock No:

WPIEA2010118

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

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