Natural Resource Rents and Human Capital Accumulation in Brunei Darussalam: A Tale of Resource Blessing?

Abstract

This paper examines the short- and long-run effects of natural resource rents, including oil and gas rents, on human capital accumulation in Brunei Darussalam, using the autoregressive distributed lag (ARDL) bound test, augmented-ARDL cointegration tests, and the Gregory-Hansen structural break testing approach for nondegenerate cointegration over the pre-COVID-19 period from 1975 to 2019. The evidence shows that resource rents (both aggregate and disaggregate oil and gas rents) crowd in human capital accumulation in both the short and long run, consistent with a ‘resource blessing’ view. The findings also reveal that past physical capital accumulation has a complementary effect on current human capital accumulation, but only in the short run. At the same time, aggregate government expenditure promotes the development of human capital only in the long run.