The role of resource endowment and business environment as drivers of sustainable economic growth in landlocked economies

Abstract

In fact, although numerous studies have examined the economic costs of being landlocked, few have comprehensively identified the factors that positively influence sustainable economic growth in landlocked countries. This motivates us to examine the factors that drive both positive and negative effects on countries’ sustainable economic growth, particularly in the context of landlocked or double-landlocked status. Accordingly, this study aimed to analyze the factors driving sustainable economic growth in 44 landlocked countries from 1998 to 2023, while accounting for their vulnerability to global shocks. Using a linear mixed-effects model with restricted maximum-likelihood estimation, the results indicate that total natural resource rents and the business environment are crucial drivers of sustainable economic growth. Specifically, political stability and lower levels of violence strongly promote growth. At the same time, higher business costs, as reflected in the EDB index, tend to decrease GDP per capita growth, mainly by deterring foreign direct investment. Moreover, business freedom scores positively and significantly influence the economic growth of landlocked countries. Lastly, we recommend that participation in deep trade agreements, digitalization of the economy, and diversification of international trade routes would improve economic growth and thereby reduce the economic vulnerability index amid global shocks. This requires landlocked countries, especially landlocked least developed countries, to undertake extensive work on strengthening institutions and the business environment, investing in human capital and technology, and leveraging trade liberalization and containerization to foster sustainable growth.