Do natural threats matter for natural resources rents? Global evidence

Abstract

Natural resources rents have decreased in the last decade, but the climate change and global warming emergency still requires urgent action to reduce further natural resources rent-seeking activities. This study contributes to the literature by analyzing how dependence on natural resources is determined by the risks and uncertainties of natural hazards. In particular, the influences of exposure and a lack of adaptation strategies on natural resources rents are estimated for a global sample of 119 countries from 2011 to 2019. The empirical results provide four interesting findings. First, increases in exposure have a decreasing effect on natural resources rents, while a lack of adaptation strategies has increasing effects. Second, the analyses for two subsamples show consistent findings for 85 developing countries, while both exposure and a lack of adaptation strategies reduce natural resources rents in 34 developed countries. Third, the analyses for five different natural resources rents (oil, coal, mineral, natural gas, and forest) are shown to be robust. Exposure to natural hazards reduces natural resources rents, except for oil rent, while a lack of adaptation strategies increases natural resources rents, except for coal rent. Last, the quantile regressions show that the effects of natural threats are more prominent in middle quantiles. The findings are checked using instrumental variable estimates and different robustness tests. The results highlight the importance of adaptation strategies to natural hazards to reduce natural resources rent-seeking activities.