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Natural Resources, Institutional Quality, and Economic Growth: an African Tale

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Abstract

This study investigates the role of institutions in the relationship between natural resources and economic growth using panel data from 44 African countries over the period 1996–2016. We use natural resource rents as a percentage of gross domestic product (GDP) and the share of ores and metals exports in total merchandise exports as variables for natural resources. To check for endogeneity, heterogeneity, and nonlinearity, we undertake cross-sectional instrumental variable analysis, system dynamic panel-data instrumental variable regression, and panel smooth transition regression. The relationship between natural resources and economic growth varies for indicators of institutional quality and the measure for natural resources.

Résumé

Cette étude examine le rôle des institutions dans la relation entre ressources naturelles et croissance économique en utilisant des données de panel de 44 pays africains pour la période 1996–2016. Nous utilisons les bénéfices tirés des ressources naturelles en pourcentage du PIB et la part des exportations de minerais et de métaux dans les exportations totales de marchandises en tant que variables pour les ressources naturelles. Pour vérifier l’endogénéité, l’hétérogénéité et la non-linéarité, nous entreprenons une analyse transversale des variables instrumentales, une régression de variable instrumentale dynamique et systémique avec données de panel et une régression à transition progressive. La relation entre les ressources naturelles et la croissance économique varie selon les indicateurs de la qualité des institutions et la mesure des ressources naturelles.

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Fig. 1

Source computed by authors from PSTR model

Fig. 2

Source computed by authors from PSTR model

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Notes

  1. Natural resource rents are defined in this study as the difference obtained from the total revenue that can be generated from the extraction of the natural resource minus the cost of extracting these resources (plus normal return on investment reported by extractive enterprises). This is the sum of oil rents, natural gas rents, coal rents (hard and soft), mineral rents, and forest rents.

  2. The various tests of linearity for the PSTR model for all 14 PSTR regressions computed in this study are available from the authors on request.

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Authors and Affiliations

  1. Faculty of Economics and Management, University of Yaoundé II, Soa, Cameroon

    Boniface Ngah Epo & Dief Reagen Nochi Faha

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  1. Boniface Ngah Epo
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  2. Dief Reagen Nochi Faha
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Appendix

Appendix

See Tables 5, 6, 7, 8, 9, and 10.

Table 5 Descriptive statistics (1996–2016)
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Table 6 Im et al. (2003) unit root test statistics
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Table 7 Sargan test of overidentifying restrictions
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Table 8 List of countries used in constructing the panel data
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Table 9 System dynamic panel-data estimates of natural resource rents on economic growth
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Table 10 Panel threshold estimations of natural resource rents on economic growth
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Epo, B.N., Nochi Faha, D.R. Natural Resources, Institutional Quality, and Economic Growth: an African Tale. Eur J Dev Res 32, 99–128 (2020). https://doi.org/10.1057/s41287-019-00222-6

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