Oil abundance and human capital in Malaysia: A multivariate cointegration analysis

Abstract

A large body of literature shows that resource-rich countries tend to have higher rates of autocracy and confrontation, lower rates of economic stability and growth as well as less developed human capital. On top of that, many studies are wary of the crowding-out effect of natural resource dependence by the rich-resource countries on human capital development. It is of great interest to determine how Malaysia as an oil abundance country manages its natural resource wealth to develop the human capital of this country. Thus, this study utilised data from the World Bank covering the period of 1980-2017. The empirical analysis was performed using an ARDL bound testing procedure and a few cointegration methods such as FMOLS, DOLS and CCR to obtain robust estimations. The results showed mixed results between fuel exports and oil and gas rent with human capital development.