Economic Complexity as a Mechanism to Overcome the Resource Abundance Paradox in Arab Countries Rich in Oil and Gas

Abstract

A wide debate in contemporary economic literature revolves around whether natural resources constitute a blessing that supports development and economic diversification or a curse that hinders them, particularly in resource-rich economies. However, this literature has not yet reached conclusive findings, especially in the context of Arab resource-abundant countries. Accordingly, this study aims to analyse the impact of economic complexity—based on the diversification of the export base—on reducing dependence on revenues derived from natural resources, while controlling for several key variables, including GDP per capita, the economic freedom index, population density, and institutional quality. The analysis covers six Arab countries that are among the most dependent on oil and gas, using unbalanced annual panel data for the period 2000–2022. To ensure robust statistical accuracy, the study employs the Driscoll–Kraay Robust Standard Errors method for the dataset. The findings reveal that both the Economic Complexity Index and non-oil revenues significantly contribute to mitigating the depletion of natural resources in the countries under study during the analysis period. The results confirm that economic complexity serves as an effective mechanism for reducing dependence on natural resources and alleviating the effects of the “resource curse.” The study concludes that economic policies should place greater emphasis on fostering economic complexity as a means to promote the diffusion of tacit knowledge, thereby creating an environment conducive to innovation, knowledge-based production, and the development of complex goods, as well as maximizing the efficient use of available natural resources.