Abstract
This research paper aims to examine the impact of the oil industry on promoting economic growth in rentier states, focusing on the effects of oil revenues, government expenditure, gross capital formation, and economic openness on economic growth. To achieve this objective, panel data covering the rentier states comprising all Gulf countries, in addition to Iraq and Algeria, were used for the period 2000–2022. A set of econometric methods appropriate to the characteristics of the dataset was employed, including the Cross-sectionally Augmented Im-Pesaran-Shin (CIPS) test, cross-sectional dependence tests, cointegration tests, as well as Fully Modified Ordinary Least Squares (FMOLS) and Augmented Mean Group (AMG) estimators. The results revealed the presence of cross-sectional dependence among the countries included in the study. According to the CIPS test, most variables were stationary at level, while gross capital formation was stationary at the first difference, I(1). The study also found that oil revenues had a positive and statistically significant effect on economic growth, with a coefficient of 0.078, whereas government expenditure had a negative and statistically significant effect, with a coefficient of -0.092. In contrast, the effects of gross capital formation and trade openness were statistically insignificant. The findings indicate that the oil industry constitutes a key driver of economic growth in rentier economies. However, sustaining this effect requires sound management of oil revenues, greater efficiency in government expenditure, economic diversification, and increased productive investment.