Abstract
Over the years, crude oil, which is a depletable natural resource has been a great contributor to economic growth across countries. However, it may not be sustainable for the development of strategic economic development plans for the future for oil-producing middle-income countries. The IMF recommends that economic diversification, i.e., diversification away from the oil sector is essential to solving this problem. Thus, the purpose of this thesis is to investigate the impact of economic diversification on economic development in oil-producing middle-income countries.This thesis applied different econometric methods to examine the effect of economic diversification on economic development in oil-producing middle-income countries including pooled OLS, fixed effect model and random effect model, the two-step generalised method of moments (GMM), generalised linear method (GLM), the Johansen Co-integration test and Vector Error Correction Model (VECM) for the time series analysis in the case study chapter. Furthermore, the study used GDP per capita growth to proxy economic growth and human development index (HDI) to proxy human development as the dependent variables whereas the variables for economic diversification, i.e., agricultural sector production, manufacturing sector production and service sector production, were adopted used as the main explanatory variables. Other explanatory variables include crude oil production, exchange rate, corruption perception index which was the variable for institutional quality as well as gross capital formation and labour force participation which were used as control variables.
The results indicate that the effect of economic diversification on economic growth measured by GDP per capita growth rate in oil-producing middle-income countries was negative and insignificant except for the services sector which was negative but significant and thus shows that economic diversification does not appear to lead to economic growth. However, oil production appeared to have a positive but insignificant contribution to economic growth in oil-producing middle-income countries which was unexpected for oil-producing middle-income countries.
Further results revealed that the impact of economic diversification does not entirely contribute to human development measured by HDI in oil-producing middle-income countries, as only one sector, i.e., the manufacturing sector had a positive impact and the other two sectors, i.e., agriculture and service sectors were negative. From the results obtained, the evidence shows that the oil-producing middle-income countries should put more focus on achieving economic diversification and relying less on oil production as both scenarios indicate sustainable economic development would be achieved by better-targeted policies on economic diversification.
The case study chapter revealed that crude oil production does not influence human development while economic diversification significantly influences human development in Nigeria and for economic growth, both the crude oil production and the economic diversification have a significant influence on Nigeria economy except the manufacturing sector. Thus, if human development is the targeted focus of policy, then the policies that target the growth of the economic diversification like agriculture, manufacturing, and services sector among others not just oil sector growth should be intensified to achieve more economic diversification and to improve the living standards of Nigerians. Conversely, this research showed that crude oil production, in the long-term has no influence on human development in the Nigerian economy and would not be a great option for the future in Nigeria.
| Date of Award | 2021 |
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| Original language | English |
| Awarding Institution |
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| Supervisor | Jin Suk Park (Supervisor), Mohammad Khaleq Newaz (Supervisor) & Mehtap Hisarciklilar (Supervisor) |