Algeria and the natural resource curse : oil abundance and economic growth

Abstract EN

In this paper we examine the interaction between oil-export revenue and long-run economic growth in Algeria during the period from 1979 until 2013.

Our empirical analysis shows that oil revenue has a positive effect on economic growth.

This means that resource abundance in itself, as proxied by oil revenue, has been a blessing for the Algerian economy and its growth and development.

Our empirical findings also suggest that there is a negative relationship between oil revenue volatility and economic growth in Algeria.

This finding confirms that the source of the resource curse is the high volatility existing in oil revenues, rather than abundance of oil in itself, which is consistent with the empirical results in Esfahani et al.

(2012) and Mohadees and Pesaran (2013).

Therefore, this study identifies that oil abundance in Algeria has been both a blessing and a curse, this is major reason why it is important for Algeria to diversify its economy and improve the quality of its institutions in order to benefit more from their natural wealth and offset the negative volatility effects of oil revenue