Illicit Natural Resource Trade and Security: Does Gold customs fraud Expand or Undermine Military Spending in Africa?

Fawzi Banao

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: In resource-rich African countries, the illicit trafficking of mineral resources poses a growing threat to state stability and governance. Therefore the paper investigates the effect of gold customs fraud on military spending, using a panel dataset of 50 African countries from 2000 to 2019. Employing an instrumental variable strategy, we find that higher levels of gold customs fraud are significantly associated with lower military expenditures. These findings suggest that illicit resource flows erode governments' tax mobilization and undermine their ability to respond to defense needs. The results are robust across multiple econometric specifications, including system GMM, and Jackknife estimation.

Keywords: Military spending; Gold customs fraud; Illicit natural resource trade (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:315363

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