Natural Resources, Financial Development and Sectoral Value Added in a Resource Based Economy

This chapter vestigates the effects of natural resource dependence and financial development on the sectoral value added in a resource based economy, Yemen. We allow the effect of these two factors to be different for the growth of agricultural, manufacturing and service sectors respectively. We remark on one hand that natural resource curse hypothesis is strongly supported. The agricultural and manufacturing sectors are affected by this phenomenon which implies the existence of Dutch disease symptoms in Yemen. On the other hand, financial sector development does not play an important role in fostering real sectors activities. The service sector is the only sector that benefit from the financial sector development in Yemen. This finding opens up a new insight for Yemeni economy to sustain sectoral growth by controlling the level of natural resource dependence and proactiveness sectoral strategy for financial sector development.