The Effects of Oil and Gas Dominance in Trinidad and Tobago

Abstract

Economic theory suggests that countries with an abundance of natural resources should perform better that those without. Yet there are many exceptions regarding states that underperform or suffer tremendously due to this endowment. Small island developing states are believed to be dependent on their natural resources such as oil and gas. However, small island developing states face unique challenges in the context of sustainable development, including vulnerabilities to external shock, dependence on international trade, and fragile economic environments. Trinidad and Tobago is one such example of a small island developing state with an abundance of oil and gas, to which its economic success is due. When compared to selected small island developing states, Trinidad and Tobago appears to be an outlier, with a higher GDP and natural resource contribution to GDP as well as higher property rights, government integrity, government spending, business freedom, and trade freedom scores. Statistical regression analysis suggests that the data supports a portion of the claims made by the natural resource curse. However, the correlation coefficients for each of the variables tested for suggest that concrete conclusions cannot be drawn from this data set.