Extractive industry rents and corruption: empirical evidence from Middle East and North Africa countries

Purpose This study aimed to analyze the relationship between extractive industry rents, as measured by oil, gas and mineral rents and corruption, as measured by the Corruption Perceptions Index, in 17 Middle East and North Africa (MENA) countries between 2010 and 2021. Design/methodology/approach The study used a panel data technique, and the findings were consistent across all estimators, confirming the approach’s robustness. The study used a panel of least squares, fixed effect, feasible generalized least squares and a dynamic two-step system of generalized method of moments. Findings The results indicated a significant positive relationship between gas rents and corruption, providing empirical evidence to support the resource curse hypothesis. Meanwhile, the results revealed a significant negative relationship between mineral rents and corruption and oil rents and corruption, providing empirical evidence to support the resource blessing hypothesis. Finally, the Pairwise Granger Causality test was used, and the findings showed the bidirectional causality between gas and corruption. Meanwhile, there were single causal directions between oil and corruption and between corruption and minerals. Practical implications Based on the study findings, MENA countries should adopt a manufacturing-based growth system instead of a resource-based one, engage in economic diversification to escape the curse brought on by an abundance of resources, enhance the blessing of resources and benefit from oil wealth by promoting the activities of non-oil economic sectors. Originality/value This paper enrich the literature by analyzing the unique political, economic and cultural characteristics and dynamics of nations with distinct challenges and opportunities in MENA countries.