Abstract:

Abstract enAbstract   Throughout the decades, theories have stated that countries with a lack of savings should well-fix its institutional structure and follow, consequently, the economic development’s path by attracting FDI. In this study two groups of countries were selected. A group of five rich-natural resources and underdeveloped countries and that of five poor-natural resources and developed countries. The first group is constituted by: Democratic Republic of Congo (DRC), Ghana, Liberia, Nigeria and Zimbabwe, while the second is composed by: Denmark, Germany, Ireland, Finland and Switzerland. This work examines the effects of natural resources, FDI and institutional quality on economic development as well as the role of natural resources and institutions in the attraction of FDI to economic development from 1996 to 2015. This study makes analysis which is relying on the fixed-effects models and on the technique of dummy variables in the population-averaged models with the OLS estimators.   The abundance of natural resources, institutional qualities and the impact of FDI on economic development is among the most curious research topics. However, the reality is that countries which are poor-natural resources perform well than richer-natural resource countries. Indeed there must be an indispensable condition such as good institutions that permit positive contribution of natural resources to economic performance. Rich-natural resources countries must establish political institutions which are production- friendly. According to the results of this study, institutional quality matter in the group of underdeveloped countries. These countries worry more about almost all institutional quality variables, whereas the group of developed countries worry more about political instability such as violence or terrorism’s likelihood and government effectiveness other than political variables. The establishment of the political institutions that reduce corruption, improve the quality of law, reduce problems in contracts’execution, respect the voice of electors, and increase the quality of control of markets may, of course,  permit natural resources and FDI to act positively on economic development in the group of rich-natural resources/oil and underdeveloped countries.

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