EconPapers    
Economics at your fingertips  
 

How do natural resource endowment and institutional quality influence the nexus between external indebtedness and welfare in Africa?

Stella Muhanji, Kalu Ojah () and Issouf Soumaré

Economic Systems, 2019, vol. 43, issue 1, 77-98

Abstract: Resource-rich African countries are often saddled with high external indebtedness. Yet, their management of resource endowment, a logical source of debt repayment, also remains a challenge, alongside their characteristic weak institutions. We investigate the relationship between external indebtedness and welfare whilst considering the pervasive influence of both natural resource rents and the quality of institutions. Using a two-stage analysis, we find that the quality of institutions, mineral- and oil-resource rents negatively affect indebtedness, while rents of aggregated natural resources, which include agricultural commodities, increase indebtedness. In the second stage, we find that welfare is enhanced by the quality of institutions, mineral- and oil-resource rents. These sets of results are interestingly conditional on the degree of resource endowment and the income level of countries, alongside the interesting effects of external indebtedness on welfare, both of which, importantly, nuance past results on the “resource curse”. Furthermore, the proxy for welfare matters: the human development index proxy reflects more the theoretical expectations of unsustainable indebtedness on welfare, than does the GDP per capita alternative. These and other results of our paper, which hold useful policy guides for African countries, are robust to alternative estimation techniques and other checks.

Keywords: Africa; Economic development; External debt; Governance institutions; Natural resources; Welfare (search for similar items in EconPapers)
JEL-codes: F34 F47 G18 H63 O13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362518305661
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:43:y:2019:i:1:p:77-98

DOI: 10.1016/j.ecosys.2018.08.005

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Haili He ().

 
Page updated 2021-01-09
Handle: RePEc:eee:ecosys:v:43:y:2019:i:1:p:77-98