Resource curse or blessing? The role of economic complexity in low- and middle-income countries’ industrialization

The intricate link between natural resources, economic complexity, and industrialization remains a critical yet underexplored issue in economic development. While previous research has examined the effects of resource endowments and economic complexity on economic growth, less attention has been given to their impact on industrialization. Moreover, existing studies have largely focused on specific regions rather than offering a broader perspective on low- and middle-income countries (LMICs). Additionally, most analyses also consider resource endowments and economic complexity separately, overlooking their interaction. Addressing these gaps, this study explores how natural resource endowments, economic complexity, and their interaction influence industrialization across 56 LMICs from 2004 to 2021. Using both static panels with a random effects model and dynamic panel via the generalized method of moments, we find that natural resource abundance negatively impacts industrialization, while economic complexity has a positive effect. Notably, the positive interaction between natural resources and economic complexity suggests that economic complexity may mitigate the adverse effects of resource endowment, offering new insights into strategies for overcoming the resource curse into blessing by enhancing industrial growth. The findings underscore the importance of developing policies that promote economic complexity as a key mechanism for fostering industrial development in LMICs. The relationship between natural resources, economic complexity, and industrialization in 56 low and middle-income countries (LMICs) is crucial but remains underexplored. This research offers critical insights into how natural resource dependence interacts with economic complexity to influence industrialization in LMICs. It demonstrates that economic complexity can significantly mitigate the negative impacts of resource abundance, commonly known as the resource curse. The finding provides valuable guidance for policymakers seeking to leverage resource wealth more effectively by promoting productive diversification and technological sophistication. The results further support the formulation of targeted economic policies designed to foster structural transformation, decrease reliance on natural resources, and enhance industrial performance. This study contributes to sustainable economic development strategies in resource-rich economies by deepening theoretical understanding and informing practical policy-making.