Natural Resources and Economic Growth in Sub-Saharan Africa: Does Corruption Matter?
Date
2022-04-01
Authors
Tsopmo, Pierre Christian
Messy, Martin Ambassa
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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
considers 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 economies of SSA countries leads to a better efficiency of the
NRs on economic activity.
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Keywords
Natural resources, Economic growth, Corruption, Panel Smooth Transition Regression (PSTR), Sub-Saharan Africa