2. Natural Resources and Economic Diversification: Evidence from the GCC Countries

We examine the impact of natural resource rents on diversification in exports, in employment and in value added, covering up to 136 countries from 1962 to 2012. We find a significant negative relationship between resource rents and diversification. The results are heterogeneous across different country groups and resources; the countries of the Arab Gulf are not an exception as they follow the high resource-dependent group. Moreover, we find that the higher the resource dependency, the less likely the country would go into diversification through its development, compared to less resource-dependent countries. Instead, concentration grows rapidly. These results are useful to policymakers in resource-rich countries who should be aware of how their economy is likely to be affected by resource rents.