The Relationship Between Oil Revenues and Economic Growth: A Panel Data Analysis on Russia and Azerbaijan

Abstract

This study examines the relationship between oil revenues and economic growth in the economies of Russia and Azerbaijan over the period 2003-2022, using annual data and a panel data analysis approach. Economic growth rates and the share of oil rents in GDP are employed as the main variables, and the data are obtained from the World Bank database. The empirical findings indicate that a 1% increase in oil rents raises economic growth by approximately 0.98%. This result suggests that oil revenues have a positive and statistically significant effect on economic growth in both countries. However, the coefficient being below unity implies that increases in oil revenues are not fully transmitted proportionally to economic growth and that there may be structural constraints in the effective utilization of these revenues. Overall, the study concludes that while oil revenues support economic growth in the short and medium term, achieving sustainable and inclusive development requires directing energy revenues toward productive investments and economic diversification.