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Do Natural Resource Endowments Affect Export Diversification in Africa? A Cross-Country Analysis
(African Economic Research Consortium, 2024-04-30) Niass, Dieynaba
This paper aims to analyse the effect of natural resources on the supply portfolio of African exports. Based on COMTRADE data on export products from 2000–2015, a methodological approach is applied using two standard measurement trade diversification indicators: active line counting and the standardised Herfindahl Hirschman index. These indicators are then linked to the status of resource-rich countries (and other controls) in a fixed-effects panel data model. The results of this paper suggest that the presence of oil resources (non-renewable resources) hurts diversification, essentially through the channel of degradation of institutions. Similarly, agricultural products (renewable resources) negatively affect African export diversification (count and index) through the exchange rate channel. This shows the need for Africa to strengthen the quality of institutions by fighting against corruption through transparency in the exploitation and export of natural resources, and through proper management. In addition, African countries must ensure the stability of monetary policies so that a depreciation of the exchange rate can be to their advantage.