The Undesired Impact of Petroleum Resources on Human Capital in Iran’s Provinces : A Double Resource Curse?

This paper investigates the impact of petroleum resource abundance on human capital in Iran’s provinces. Using a feasible generalized least square method and panel data for 28 provinces in Iran collected between 2000 to 2014 we examine the relationship between petroleum abundance and human capital, measured by education and health care. The identical results are obtained applying the dynamic GMM method to address endogeneity issues. We contribute to the literature by distinguishing the location of the provinces in either upstream downstream (UD) or merely downstream (D) petroleum activities. The results not only confirm the crowding-out effects of petroleum resource abundance on human capital in Iranian provinces but also show that this phenomenon is exacerbated in provinces with both upstream and downstream (UD) activities compared to provinces with only downstream (D) processes. This suggests the double resource curse, which implies that regions with more involvement in oil activities accumulate less human capital. We also show the impact of two sanctions on Iran to determine whether they had a significant impact on human capital accumulation. Finally, we find mixed results concerning the impact on human capital of imposed sanctions on Iran