ABSTRACT
The chapter examines natural resource dependency especially that of oil dependence and its relationship with structural stability of economies. It is found that the more persistent the shocks cumulatively over time, the harder it is for countries that record significant income decline due to oil crises to recover from the shocks. It is evident from the analysis presented in the chapter that oil shocks accentuate income disparities between oil and non-oil producing countries. Another distinguishing finding is that impact of oil crises on low-income and slow-growing countries is more severe than for high-growth countries.
The chapter additionally presents case studies of several oil-dependent countries to substantiate empirical findings. It is found that structural stability is suggestively influenced by oil exports. The value added in agriculture remained highly volatile in oil-exporting countries leading to structural instability. Not only value added in agriculture, Gross Domestic Product (GDP) also witnessed a fluctuating trend due to volatility in oil exports which could be due to oil crises or volatility in oil prices in international markets. Volatility of incomes leaves its impact on employment and development initiatives. The chapter concludes that oil-dependent countries need to make greater efforts to reduce their dependency on oil exports and find the right path to economic diversification.
