Do effective governance and political stability facilitate the promotion of economic growth through natural resource rents? Evidence from Africa

Frank Bannor, Isaiah Magambo, Jean Luc Mubenga-Tshitaka, Mduduzi Biyase and Bismark Osei-Acheampong

MPRA Paper from University Library of Munich, Germany

Abstract: This study explores the relationship between natural resources, governance, political stability, and economic growth in African countries. The study employs a robust econometric approach, the pooled mean group (PMG), to account for slope heterogeneity and cross-sectional dependency in the dataset. The study finds evidence that supports the resource curse hypothesis, which suggests that an abundance of natural resources can stifle economic growth. However, the study also finds that effective governance and political stability can mediate the negative impact of natural resource rents on economic growth. The findings suggest that investment in political stability, and effective governance, manifested through institutional quality, can directly boost economic growth in Africa. However, their indirect contribution can be maximized by linking them to natural resource utilization. The study recommends that policymakers prioritize the indirect contribution of effective governance, and political stability for transforming natural resource abundance into prosperity for resource-endowed African economies. This requires building credible and sustainable governance systems, particularly for natural resource revenue management and utilization. Additionally, political reforms should focus on building systems that prevent autocratic or corrupt political elites from solely benefiting from the physical control of natural resource rents.

Keywords: Natural resource rents; resource curse hypothesis; governance; political stability; economic growth; Africa. (search for similar items in EconPapers)
JEL-codes: O1 O13 O17 (search for similar items in EconPapers)
Date: 2023-03-15
New Economics Papers: this item is included in nep-dev, nep-ene and nep-env
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