Natural Resource Endowment and Sustainable Development Linkage in Ethiopia

Abstract

Natural resource endowment in many economies of the world became a curse rather than blessing. The purpose of this study is to examine the link between natural resource endowment and sustainable development in Ethiopia over the period 1981 to 2016 using an Autoregressive distributed lag (ARDL) modeling approach. The findings suggest that natural resource endowment has no significant effect on sustainable development (measured by adjusted net national income) in Ethiopia in the long run but it has a statistically significant negative effect in the short run, supporting the hypothesis in the resource curse literature. Among the other variables included in the model of sustainable development, investment (gross capital formation) and human capital are found to have a significant positive effect while debt servicing is found to affect sustainable development in Ethiopia negatively in the long run. On the other hand, population growth and trade openness are found to have a statistically significant negative effect on sustainable development in Ethiopia both in the long run and short run. Policies towards increasing the human capital stock in the country, among others, are the policy options that the government could work on so as to tackle the possible problems of natural resource curse and achieve sustainable development goals in the country.

Keywords: Natural Resources Endowment; Sustainable Development; Resource Curse; Ethiopia.

DOI: 10.7176/JRDM/63-03

Publication date:March 31^st 2020