Is Oil as a Financial Resource Productive?

This paper uses oil resource and total factor productivity as the proxies for the nominal economy and real economy, respectively, to show how oil as a financial resource would impact on economic productivity. We analyze the effect of oil export and oil import on the TFP growth rate in the full sample covering 132 countries from 1970 to 2014. Both system-GMM and nonparametric empirical results show that the oil resource has a significant negative influence on productivity growth in long-run. The empirical findings show that a 1% increase in oil export would result in 1.18% decrease in the TFP growth rate and a 1% increase in oil importing would lead to 2.91% reduction in TFP growth. After an oil price shock, the TFP growth rate declined in the resource-poor countries. Similar findings are arrived when the globe economy in divided into three groups of countries (oil exporting only, oil importing only, and countries performed both export and import of oil). The results support the argument that oil-rich countries failed to use their abundant oil resource for long-run economic growth.