Why Oil Isn't Always a Blessing: Yemen's Story

You'd think having lots of oil would make a country rich, but that’s not always the case. Some countries with plenty of natural resources have slower economic growth. This is what people call the "resource curse. " Most studies look at rich countries, but what about a place like Yemen, which is new to exporting oil? Let’s dive into that. Researchers looked at data from 1990 to 2019 to see how changes in oil prices affect Yemen’s economic growth. They used a complex model called auto-regressive distributed lag (ARDL) to check this out. Surprisingly, they found that when oil prices fluctuate, Yemen’s economy shows growth both in the short and long term. But hold on, there’s a catch: the money made from selling oil, or "oil rents, " actually harms the economy both immediately and over time. The researchers double-checked their findings, and guess what? The results were consistent. So, what does this mean for Yemen? The advice is clear: don’t count too much on oil. Instead, focus on other areas like agriculture and tourism. Investing in people’s skills, education, and research can really make a difference. This way, the economy can grow in a way that lasts. This information is super useful for those making decisions for the country. It helps them create plans that can keep the economy growing over a long period.