The Oil, Government’s Budget and Economic Growth: A Dynamic Panel Data Model for Selected Oil Exporting Economies

Author

Department of Economics and Management, Institute for Humanities and Cultural Studies, Tehran, Iran

Abstract

Recognition of economic growth determinants is one of the most important concerns for economists. In the oil exporting countries oil revenues play a significant role for the economy alongside with other economic growth determinants. This paper attempts to investigate the role of oil in selected oil-revenue dependent economies. Since oil revenue goes directly to public treasury and is expended by the government, government’s management for this revenue would be crucial in the economy. This paper utilizes a proposed index, as Government Savings over Oil Revenues (GSOR). The higher level of GSOR suggests that governments finance their expenses by non-oil revenues more than oil revenues, which is a better situation. Findings from a Dynamic Panel Data model and GMM estimation method, on 12 oil exporting economies during 1990-2013, show that GSOR has significant positive effect on real GDP growth.

Keywords


Arellano, M., & Bond, S. (1991). Some Test of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations.  Review of Economic Studies, 58, 277-297.

Atkinson, G., & Hamilton, K. (2003). Savings, Growth and the Resource Curse Hypothesis. World Development, 31(11), 1793-1807.

Auty, R. M. (2001). Resource and Economic Development. Oxford: Oxford University Press.

Baltagi, B. (2005). Econometric Analysis of Panel Data (3rd Ed.). New York: McGraw-Hill.

Barro, R. J. (1990). Government Spending in a Simple Model of Endogenous Growth. Journal of Political Economy, 98(5), 103-125.

Bose, N., Hague, M. E., & Osborn, D. (2007). Public Expenditure and Economic Growth: a Disaggregated Analysis for Developing Countries. The Manchester School, 75(5), 533–556.

Corden, W. M. (1984). Booming Sector and Dutch Disease Economics: Survey and Consolidation. Oxford Economic Papers, 36, 359-380.

Eifert, B., Gelb, A., & Tallroth, N. B. (2002). The Political Economy of Fiscal Policy and Economic Management in Oil Exporting Countries. World Bank Policy Research Working Paper, 2899, Retrieved from

http://documents.worldbank.org/curated/en/247121468766485195/pdf/multi0page.pdf.

Eltejaei, E. (2015). Oil, Government’s Budget and Economic Growth in Iran. International Journal of Economic Policy in Emerging Economies, 8(3), 213-228.

---------- (2007). Structural Changes and Economic Growth (Unpublished Doctoral Dissertation). University of Allameh Tabataba’ei, Tehran.

Gylfason, T. (2001). Natural Resources and Economic Growth: What Is the Connection? CESifo Working Paper, 530, Retrieved from http://www.cesifo-group.de/DocDL/cesifo_wp530.pdf.

---------- (2000). Natural Resources, Education, and Economic Development. 15th Annual Congress of the European Economic Association Bolzano, Retrieved from

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.320.9463&rep=rep1&type=pdf.

Gylfason, T., Herbertsson, T. T., & Zoega, G. (1999). A Mixed Blessing: Natural Resources and Economic Growth. Macroeconomic Dynamics, 3, 204-225.

Herbertsson, T. T., Skúladóttir, M. G., & Zoega, G. (1999). Three Symptoms and a Cure: A Contribution to the Economics of the Dutch Disease. Institute of Economic Studies, University of Iceland, Working Paper, W99:10, Retrieved from

https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2364.

Hirischman, A. O. (1958). The Strategy of Economic Development. New York: Yale University Press.

Rodriguez, F., & Sachs, J. (1999). Why Do Resource Abundant Economies Grow More Slowly? Journal of Economic Growth, 4, 277-303.

Sachs, J. D., & Warner, A. M. (1999). Natural Resource Intensity and Economic Growth. In J. Mayer, B. Chambers, & A. Farooq (Eds.). Development Policies in Natural Resource Economies. Cheltenham: Edward Elgar.

Sachs, J. D., & Warner, A. M. (1997). Natural Resource Abundance and Economic Growth. Center for International Development and Harvard Institute for International Development, Retrieved from

https://academiccommons.columbia.edu/download/fedora_content/download/ac:138843/CONTENT/NaturalResourceAbundanceWarner.pdf.

Schaltegger, C. A., & Torgler, B. (2006). Growth Effects of Public Expenditure on the State and Local Level: Evidence from a Sample of Rich Governments. Applied Economics, 38(10), 1181–1192.

Stiglitz, J. E. (1996). Some Lessons from the East Asian Miracle. World Bank Research Observer, World Bank Group, 11(2), 151-77.

Suruga, T., & Le, M. V. (2005). Foreign Direct Investment, Public Expenditure and Economic Growth: the Empirical Evidence for the Period 1970–2001. Applied Economic Letter, 12(1), 45–49.

Tsaurai, K., & Odhiambo, N. M. (2013). Government Expenditure and Economic Growth in Zimbabwe: an ARDL-Bounds Testing Approach. International Journal of Economic Policy in Emerging Economies, 6(1), 78-90.

World Bank. (2015). Online. Retrieved February 2, 2016, from http://data.worldbank.org/country.