Capitalizing on natural resources rent and renewable energy in enhancing economic growth—New evidence with MMQR method

Abstract

Natural resources are vital resources given by nature and are responsible for promoting a nation's economic development. However, with the existence of two opposing theories, it is essential to provide state‐of‐the‐art research that ascertains the association between natural resources and economic growth. The Rostow hypothesis presents the importance of natural resources in promoting economic growth, while the resources curse hypothesis alludes that natural resources, in the developing countries, reduce economic growth. The present research uses the contemporary Methods of Moments Quantile Regression method to explore on this relationship in the fifteen natural resources‐rich African countries. The data used are annual data for the period 1990 to 2021. The major results presented in this research show that natural resources rent significantly promotes economic growth in this region, supporting the postulations of Rostow's hypothesis. Renewable energy is also observed to play a significant role in raising economic growth of this region. However, labor force participation rate is determined to reduce economic growth and this can be explained by high levels of unemployment in this region. Capital provides a positive but insignificant effect on economic growth of the natural resources‐rich African countries. The study results also show that economic growth, capital, trade openness, and labor force enhance natural resources rent. The study calls for the improvement in the use of renewable energy and natural resources in order to attain sustainable economic development in this region.