Rents from Natural Resources and Relations to Knowledge Economy in Arab Countries

Rents from Natural Resources and Relations to Knowledge Economy in Arab Countries

Copyright: © 2014 |Pages: 22
DOI: 10.4018/978-1-4666-5210-1.ch013
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As some of the Arab countries are already facing the post-oil era in relation to the trends taking place in mining and in the oil and gas industries, with future possibilities of exhaustion of oil and gas reserves, diversification of economic activities has been emerging in some of these economies. However, the creation of new portfolios has not been expanded outside the traditional spectrum of economic activities. Besides that, governments and of public sovereign funds are still playing an important role both domestically and internationally, implying that rents from natural resources are still promising sources for economic development. This chapter addresses a series of issues related to how rents are driving the development path in relation to access of most world countries to the gains from the new economy. It also shows how knowledge variables have been related to the rents obtained from natural resources. Finally, the hypotheses in relation to natural resources as a curse to knowledge development are tested in the present chapter.
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Literature Review

Rents related to exhaustible and renewable natural resources have been largely discussed in both economic theory and in empirical applications. The changes taking place in both domestic and international markets have also been emphasizing the roles of rents in different economies but also in the implications of rents on the political economies. As Arab countries are important producers and exporters of natural resources, mainly those related to mining, series of papers have been raising different issues related to the effects of rents. These papers range from those asking questions about the opportunity of having exhaustible resources to those that suggest means for better using of the revenues from mining activities. As growth and development require further access to knowledge, and as the link between knowledge and development has been shown to be obvious, the present literature reviews mainly the relationship between oil resources and economic performance.

In an early paper by Sachs and Warner (1997), natural resource abundance is related to economic growth. The authors observe that economies with a high ratio of natural resources to GDP in 1970 tend to grow slowly during the period 1970-1990. Additional evidence is then discussed to understand the negative relationship between resource abundance and economic growth. But, Lange and Motinga (1997) already mentioned the specific status of both exhaustible and renewable resources in relation to the rents generated through these activities. To the authors, extractive resources like minerals and fisheries generate “resource rents,” or income above the normal return to capital invested in economic activities, an income attributable to the scarcity of the resource relative to demand for the resource on the world market. The authors underline that sustainable and equitable management of these resources requires that resource rent be recovered through appropriate taxes. The paper reports estimates for Namibia as an economy that is capturing rents related to exhaustible resources but not that related to fisheries.

Ebeke and Ombga (2011) discuss oil rents and allocation of talents in relation to the quality of governance in a sample of 69 developing economies. The authors conclude that good governance leads to orient talents towards productive activities while lower quality governance may induce human resource allocation to rent-seeking.

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