Testing the Natural Resource Curse Hypothesis From an Environmental Perspective: Empirical Evidence From OPEC Countries

Abstract

This study investigates how the abundance of natural resources, specifically crude oil production, affects environmental quality measured by fine particulate matter (PM2.5) concentration-a crucial indicator of air pollution and vital for human health-in the Organization of the Petroleum Exporting Countries from 2010 to 2019. It also considers various possible socioeconomic factors influencing environmental quality, drawing on theoretical arguments and existing literature. In this context, we estimate our empirical models through the feasible generalized least squares (FGLS) method as per the procedure of hierarchical panel regression analysis. This approach ensures our results are unbiased and efficient by addressing issues like heteroscedasticity, autocorrelation, and cross-sectional dependency. The main result of the study refers to the positive nexus between crude oil production and PM2.5 concentration. In addition, the study finds no evidence supporting the environmental Kuznets curve hypothesis. Population density is identified as another factor contributing to environmental contamination. Conversely, progress in industrialization, urbanization, and trade openness appears to enhance environmental quality. Additional analyses were conducted using the Driscoll-Kraay and the system-generalized method of moments approaches to validate these findings. The results from these methods strongly confirm the conclusions drawn from the FGLS approach regarding the relationship between natural resource abundance and environmental quality. Overall, the findings highlight the negative impact of natural resource abundance on environmental quality, illustrating the existence of a resource curse phenomenon from an environmental perspective. The study concludes with significant policy recommendations designed to mitigate the adverse effects of natural resource abundance on environmental quality.