Investigating resource curse/blessing hypothesis: An empirical insights from Luxembourg, the Netherlands, and Portugal economies

This study inquiries the effect of natural resource rents on economic growth to test the resource curse/blessing hypothesis in Luxembourg, the Netherlands, and Portugal from 1980 to 2021 by using bound testing techniques. Natural resource rents may facilitate us to test the resource curse/blessing hypothesis. Moreover, we cannot ignore labor and capital in the growth equation as per both classical and modern production functions. Besides this, energy use, trade liberalization, and financial development are important determinants of economic growth and are considered in the production function. The estimated results disclose that natural resource rents significantly hamper economic performance in the Netherlands and improve economic performance in Portugal. Hence, the results validate the resource-curse hypothesis in the Netherlands and the resource-blessing hypothesis in Portugal. Moreover, the energy consumption-led growth and trade-led growth hypotheses are validated in all three economies. In addition, financial liberalization triggers economic performance in Luxemburg and the Netherlands. Lastly, capital accumulation is also stimulating economic growth in all three selected European capital-rich economies.