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Exploring the nexus among natural resource rents, human capital and industrial development in the SSA region

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Abstract

This paper investigates whether the natural resource rent has a role to play in the human capital-industrial development nexus. The study specifically examines how human capital development in sub-Saharan Africa can spur industrial development and probing how natural resource rent serves as a propeller in this process for a sample of 17 sub-Saharan African countries over the period of 1995–2015. We deploy the use of fixed effect model to examine this nexus. The findings from our estimated model reveal that the different measures of human capital investment does not propel industrial development as health expenditure has a direct drag effect. This gives insight into the challenges facing the industrial sector in the region. Similarly, the correlation further lend support to these findings in terms of direction/association. On natural resource rent as financing option, the coefficients are largely negative but their magnitudes are significantly small. More so, the results also show that the indirect impact of natural resource rents through human capital measures was negative when interacted with education measure while positive for health interaction term. Thus, this study clearly shows the challenges bedeviling SSA region industrial development and suggests that in an attempt to boost industrial sector development, it is important for the governments in SSA region to explore efficiently, the fund from the sale of natural resources by allocating sufficient fund and design monitoring framework for human capital development vis-à-vis industrial development.

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Notes

  1. The distinction between human capital and labour was explicitly explored in the extension of the Solow growth model. Labour is simply the skill that individuals are endowed with. On the other hand, human capital measures the total amount of productive services supplied by workers in the production process. More importantly, it shows the total contribution of workers of different skills levels in the production. Thus, it involves the skills acquired by labour to enhance productivity (Romer 2006). In addition, human capital shows the stock of skills and knowledge embodied in the ability to perform as efficient labour so as to produce economic value” (Sheffin 2003).

  2. Adjusted value of capital stock was used in Eq. 1 below following the argument on TNRR.

  3. In a growth model developed by Solow (1956), the role labour and capital was clearly established in the growth an economy. Industrial sector is a sector in an economy which also rely on the contribution from factors of production such as capital and labour for its productive activities.

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Acknowledgements

The authors are grateful to the Editor-in-Chief of the Journal and the two anonymous reviewers for their highly insightful and supportive comments that contributed immensely to the improvement in the quality of this paper.

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  1. Department of Economics, University of Ibadan, Ibadan, Nigeria

    Mutiu A. Oyinlola, Abdulfatai A. Adedeji & Modupe O. Bolarinwa

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  1. Mutiu A. Oyinlola
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  2. Abdulfatai A. Adedeji
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  3. Modupe O. Bolarinwa
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Correspondence to Mutiu A. Oyinlola.

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Appendix: list of countries

Appendix: list of countries

Burkina Faso, Cameroon, Congo Dem. Rep, Cote d’Ivoire, Ghana, Kenya, Madagascar, Malawi, Mali, Mozambique, Niger, Nigeria, Senegal, South Africa, Sudan, Tanzania, Uganda.

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Oyinlola, M.A., Adedeji, A.A. & Bolarinwa, M.O. Exploring the nexus among natural resource rents, human capital and industrial development in the SSA region. Econ Change Restruct 53, 87–111 (2020). https://doi.org/10.1007/s10644-018-09243-3

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