Natural Resources and Economic Growth in sub-Saharan Africa: Does Corruption Matter?
Date
2021-11-15
Authors
Tsopmo, Pierre Christian
MEssy, Martin Ambassa
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
The existing literature on the relationship between natural resources (NRs) and
growth is inconclusive. To enrich this debate, some studies have investigated the
role of institutions in the NRs-growth nexus. Unlike most previous work, which
mostly consider the interactive effect of institutions, notably corruption, on the
relation between NRs and growth, this paper determines the optimal threshold of corruption below and above which NRs affect economic growth differently. The
aim of this paper is to investigate the effect of NRs on economic growth conditioned
by the level of corruption in SSA. Using a panel data on 26 Sub-Saharan Africa (SSA)
countries over the period of 1985 to 2014, this paper uses the Panel Smooth Transition
Regression (PSTR) model developed by Gonzalez et al. (2005). Firstly, we found
evidence of the existence of corruption thresholds that change the effect of NRs on
economic growth. These thresholds are 0.94, 0.40, 2.33, 1.16 and 0.48 for public,
executive, legislative, judicial, and political corruption, respectively. Secondly, the
relation between NRs and economic growth below and above each type of corruption
gives mixed results. The sensitivity analysis, which led to the decomposition of
NRs into forest and oil resources, confirms the divergence of the results found by
the baseline specification. These results have significant implications for policy
sequencing in SSA. To benefit from NRs-led growth, improvement of the institutional
framework, including different political corruption reducing, should precede NRs
management policies. Also, a certain diversification of the economy of SSA countries
leads to a better efficiency of the NRs on economic activity.