GOOD GOVERNANCE AND NATURAL RESOURCE CURSE; WHICH HYPOTHESIS IS PREVAILING IN ASEAN ECONOMIES?

  • Deden Iskandar Diponegoro University
  • Robertus Mulyo Hendarto Diponegoro University
  • Adhevyo Reza
Keywords: ASEAN economies, control of corruption, good governance, natural resource curse, Worldwide Governance Indicators (WGI)

Abstract

This study aims to find the relevance of the natural resource curse and good governance hypothesis in ASEAN economies post-financial crises 1998. Employing Generalized Method of Moments (GMM), this study finds that good governance practices (Control of Corruption, Political Stability, and Voice and Accountability) play a role in the ASEAN economies after the great financial crisis. Thus, the hypothesis stating that good governance practices will improve economic development is confirmed. On the other hand, the observation of the natural resource curse hypothesis in ASEAN countries returns mixed results. The hypothesis states that natural resource abundance is associated with lower economic performance. This study finds that dependence on the natural resource by itself does not affect GDP. However, the natural resource curse occurs when countries with bad governance (low Control of Corruption) depend on agriculture resources. On the other hand, the natural resource becomes a blessing when the countries that rely on agriculture resources are supported with good governance practices in terms of strong Government Effectiveness, Political Stability, and Voice and Accountability.  Thus, the effect of natural resources on economic development depends on the quality of governance. This paper highlights the importance of observing the natural resource and good governance in interaction instead of in isolation and the relevance of disaggregating the indicators of good governance as well as natural resources.

Downloads

Download data is not yet available.

References

Akylbekova, D. (2015). Analyzing the Resource Curse Theory : a Comparative Study of Kazahstan and Norway. Thesis, 18.
Bakwena, M., Bodman, P., Le, T., & Tang, K. K. (2009). Avoiding the Resource Curse : The Role of Institutions. MRG Discussion Paper Series, 32, 1–33.
Baltagi, B. H. (2008). Econometrics (4th Edition). New York: Springer-Verlag Berlin Heidelberg.
Farooq, A., Shahbaz, M., Arouri, M., & Teulon, F. (2013). Does Corruption Impede Economic Growth in Pakistan? Economic Modelling,35, 622-633.
Hsiao, C. (2004). Analysis of Panel Data (2nd Edition). Cambridge: Cambridge University Press.
Huang, C. J., & Ho, Y. H. (2017). Governance and Economic Growth in Asia. North American Journal of Economics and Finance, 39(100), 260–272.
IMF. (2012). Macroeconomic Frameworks for Resource-rich Developing Countries, 1–55.
Kraipornsak, P. (2018). Good Governance and Economic Growth: An Investigation of Thailand and Selected Asian Countries. Eurasian Journal of Economics and Finance. 6. 93-106.
Mauro, P. (1995). Corruption and Growth. The Quartlerly Journal of Economics, 110(3), 681–712.
Oyinlola, M. A., Adeniyi, O. A., & Raheem, I. D. (2015). Natural Resource Abundance, Institutions and Economic Growth in Africa. African Journal of Economic and Sustainable Development, 4(1), 34.
Roberts, J. M., & Robinson, J. A. (2015). The Resource Curse - The Political and Economic Challenges of Natural Resource Wealth. NRGI Reader, (March), 71–78.
Roodman, D. (2009). How to Do xtabond2: An Introduction to Difference and System GMM in Stata. Stata Journal, 9(1), 86–136.
Sachs, J. D., & Warner, A. M. (1995). Natural Resource Abundance and Economic Growth. NBER Working Paper Series, 3, 54.
World Bank (2018). Worldwide Governance Indicator. Available at https://info.worldbank.org/governance/wgi/#home [Retrieved at September 10, 2018]
Wright, G., & Czelusta, J. (2004). The Myth of the Resource Curse. Challenge, 47(2), 6–38.
Yousefi, A. (2011). The Impact of Information and Communication Technology on Economic Growth: Evidence from Developed and Developing Countries. Economics of Innovation and New Technology, 20(6), 581–596.
Zagozina, M. (2014). The Resource Curse Paradox : Natural Resources and Economic Development in The Former Soviet Countries, Thesis, 1–70.
Published
2020-06-30
How to Cite
Iskandar, Deden, Robertus Mulyo Hendarto, and Adhevyo Reza. 2020. “GOOD GOVERNANCE AND NATURAL RESOURCE CURSE; WHICH HYPOTHESIS IS PREVAILING IN ASEAN ECONOMIES?”. Jurnal Ekonomi Dan Pembangunan 28 (1). https://jurnalekonomi.lipi.go.id/JEP/article/view/436.