Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162625
Authors: 
Farzanegan, Mohammad Reza
Thum, Marcel
Year of Publication: 
2017
Series/Report no.: 
CEPIE Working Paper 09/17
Abstract: 
The resource curse hypothesis suggests that resource-rich countries show lower economic growth rates compared to resource-poor countries. We add to this literature by providing empirical evidence on a new transmission channel of the resource curse, namely, the negative effect of rents on the quality of education. The cross-country analysis for more than 70 countries shows a significantly positive effect of oil rents on the quantity of education measured by government spending on primary and secondary education. Hence, the underspending hypothesis championed by Gylfason (2001) no longer holds with newer data. However, we find a robust and negative effect of oil rents dependency on the current objective and subjective indicators of quality of education, controlling for a set of other drivers of education quality and regional dummies. Despite pending significant shares of GDP on education, oil-rich countries still suffer from an insuficient quality of primary and secondary education,which may hamper their growth potentials. The significant negative effect of oil rents dependency on education quality can be explained by both the demand (e.g., skill acquisition) and supply (e.g., teacher quality) side channels.
Subjects: 
oil rents
resource curse
quality of education
quantity of education
JEL: 
H52
I25
Q32
Document Type: 
Working Paper

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