The role of innovation in the natural resource curses hypothesis

The so-called "Natural Resource Curse" in the economics literature, the notion that rich natural resources do not contribute sufficiently to the economic growth of countries and cause more unfavorable outcomes compared to natural resource-poor countries, has been the subject of many studies in recent years. This phenomenon is explained by several factors such as volatility in commodity prices, the Dutch disease phenomenon, rent-seeking activities, weak institutional structure, and social conflicts. There are views that various factors may play a role in overcoming the Natural Resource Curse and one of these factors is innovation. Innovation can transform inefficient investments into more productive investments and enable the realization of high-tech production processes that can resist the negative effects of the appreciating exchange rate. This study aims to examine whether the natural resource curse hypothesis is valid and whether innovation can eliminate the impact of this curse in a sample of natural resource-rich countries. For this purpose, Panel ARDL test is applied to a sample of 18 natural resource-rich countries for the period 1993-2019. The findings show that there is a U-shaped relationship between natural resource dependence and economic growth, in other words, initially the natural resource curse hypothesis is valid and after a certain level of output, natural resource dependence supports economic growth. On the other hand, it shows that increasing levels of innovation cannot compensate for the negative impact of natural resource dependence on economic growth.