Resources Policy 63 (2019) 101406

Contents lists available at ScienceDirect

Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

Natural resources curse: A reality in Africa T

Pr Atangana Ondoa Henri
University of Yaoundé II, Cameroon

ARTICLE INFO ABSTRACT

Keywords: The objective of this study is to identify the institutional and economic indicators that are more negatively
Africa affected by natural resource rents in Africa. For this purpose, it used the two-stage least squares (2SLS) and data
Natural of the World bank (WDI and WGI) for the period 1992–2016.The results show that the most institutional pro-
Curse and resource blems caused by natural resources rents are by order: corruption; problem of rule of law or justice; inefficient
public administrations; bad regulation; lack of voice and accountability; political instability. Natural resources
rents also cause volatility of GDP per capita, leading to low level of physical and human capital accumulation.
For these reasons, African countries should promote good governance and diversify their economies.

1. Introduction
The socio-economic effects of natural resources have been widely
studied and debated amongst researchers. Until 1980s, certain authors
especially, most neoliberal economists like Rostow and Balassa believed
that natural resources were a major advantage for economies to ex-
perience rapid growth and development. Rostow (1961) for example,
considered raw materials abundance as an element of precondition for
the “take-off” from LDCs to that of industrial development. Balassa
(1980) showed that natural resources contribute to industrial devel-
opment because they provide funds for physical capital formation and
increase demand of industrial products. Deaton (1999) also argues that
natural resources rents are a potential source of funds for physical ca-
pital accumulation. Even temporary price booms provide windfalls that,
if invested, can enhance future growth. A recent study of Shahbaz et al.
(2017) shows that natural resources contribute to financial develop-
ment and that economic growth. Due to certain external shocks like an
increase of primary commodities prices or abundant natural resource
endowments, natural resources rents can help the development of other
tradable sectors like manufacturing or services. Indeed, the accumula-
tion of innovation spills, physical and human capital in mines sector
over to the rest of the economy can boost economic growth
(Matsuyama, 1992; Ross, 2005).
A very widely accepted evidence of the new trade theory is that
trade in specialized products like natural resources has positive supply
side implications for economic growth, because it facilitates the
achievement of static and dynamic economies of scale. It also facilitates
learning by enhancing raw materials production (Krugman, 1987;
Murshed and Serino, 2011). According to Dutt (2003), high prices of
raw primary commodities increase growth by relaxing the trade bal-
ance constraint in the short run. However, in the medium run and in the
long run if the well-known Marshall–Learner condition holds true and
following the Prebisch–Singer hypothesis, the attempt to increase
growth will induce LDCs terms of trade to deteriorate and the price of
raw materials to decrease with respect to that of industrial goods
(Bianchi, 2004).
The natural resources curses refers to the paradox that countries
endowed with raw materials tend to have lower GDP per capita and
worse development outcomes than countries with fewer natural re-
sources. Angola, Congo and Nigeria, are good examples of economies
well-endowed in natural resources that suffer widespread poverty
(Badeeb et al., 2017). For this paradox of plenty, most authors have
been skeptical about the idea that natural resources induce economic
development. For instance, Bruno and Sachs (1982); Corden and Neary
(1982) developed the Dutch disease theory that attracted most atten-
tion. They based their analyses on the example of the Netherlands in
natural gas extraction in 1970s and showed that raw materials ex-
ploitation draws labour out of the manufacturing industry towards the
extractive industry due to more attractive wage in the mining sector
(Joya, 2015). Sachs and Warner (1995) argue that the impact of natural
resources on economic development is negative, and the finding has
been labeled the “natural resource curse1" (Havranek et al., 2016).
Natural resources discovery in developing countries, especially in
Africa, rather than yielding sustainable socio-economic advantage to
those countries, is considered to be a ‘curse’. Indeed, corruption per-
meating within oil-rich developing countries impedes transparency and
accountability resulting in the resource-curse (Adams et al., 2019).
Following Mehlum et al. (2006), natural resource curse only occurs in

E-mail address: atanganaondoa@yahoo.fr.

1
A situation where the income generated from resource usage is lower than the total input cost (Corrigan, 2014).

https://doi.org/10.1016/j.resourpol.2019.101406
Received 18 January 2019; Received in revised form 11 May 2019; Accepted 14 May 2019
0301-4207/ © 2019 Elsevier Ltd. All rights reserved.
P.A.O. Henri
economies with low institutional quality and those with good institu-
tions, raw materials can foster long-term development. They claim that
these economies typically have weak institutions, poor governance
systems, inadequate skills, expertise and methods needed to manage the
resources. The issue on the ‘natural resource-curse’ assumes that de-
veloping oil-rich countries are susceptible to rent-seeking behaviour,
petroleum revenue mismanagement, poor governance, socio-economic
and political crisis and regional conflicts that can weaken democratic
processes, stability, growth and development (Adams et al., 2018).
According to Frankel (2010), natural resource revenue mismanagement
seems to be one of the major factors contributing to a weakening in
Africa's democratic processes and economic development. Furthermore
natural resources rents induces appreciation of the real exchange rate,
deindustrialization, and that these adverse effects are more severe in
volatile countries with bad institutions and lack of rule of law, cor-
ruption, presidential democracies, and underdeveloped financial sys-
tems” (Van der Ploeg, 2010a).
A new approach on natural resources curses developed by Adams
et al. (2019); Adamset al., (2017); Kolk and Lenfant (2010); Kopiński
et al. (2013) explains the curse by globalization. In oil-rich developing
countries, multinational corporations (MNCs) often implement various
strategies such as legitimization, transfer pricing and tax avoidance to
deprive countries well-endowed in natural resources from benefiting
fully from their legitimate, mandated and legal share of their natural
resource endowments. Additionally, multinational firms lack corporate
social responsibility commitments including sustainably responsible
exploitation of resources to support environmental preservation and
sustainable growth and development (Adams et al., 2019).
Natural curse has attracted significant academic attention, studies
have focused on economic growth, industrialisation, inflation, physical
and human capital accumulation, governance and institution quality.
However, despite considerable evidence on the notion of a resource
curse, the literature has not identified the macroeconomic indicators
that are more worsen because of natural resources curse. This paper
extends these previous studies of the paradox of plenty in Africa. The
purpose of this article is not to continue the debate about whether
natural resources are a ‘curse’ or a blessing, but rather, to identify the
institutional and macroeconomic indicators that are more worsen in
Africa because of natural resources. For this reason, the article is or-
ganized as follows: Section 2 covers the literature review, section 3
develops econometric model and section 4 presents the results.
2. Literature review
Developing countries well-endowed in natural resources suffer slow
economic growth and development. However, why most economies
well-endowed in natural resources perform economically well while
others owning perform poorly. The debate is complex when we consider
the quantification of the raw material sector (Adams et al., 2018).
Through his descriptive analysis, Gelb (1988) established a resource
curse thesis. He found that oil economies experienced a more serious
deterioration in the efficiency of their domestic capital formation
during the boom period of 1971–1983 than did non-oil economies. Gelb
argued that the cost of using oil windfalls can offset the gains from the
windfalls themselves (Badeeb et al., 2017). Inspired by the above
findings, Sachs and Warner launched a series of studies (Sachs and
Warner, 1995; 1997, 1999, 2001). The purpose of these studies was to
test empirically the existence of a negative relationship between natural
resource dependence and economic growth. Sachs and Warner (1995)
arguably produced the first scholarly work confirming the adverse ef-
fects of resource dependence based on empirical evidence. Gylfason
(1999, 2001) showed that savings, investment and human capital for-
mation are the broader channels through which natural resource de-
pendence could affect sustained economic growth. Badeeb et al. (2017)
investigate the mechanisms that link resource dependence to poor
economic performance. These mechanisms can be divided into two
2
Resources Policy 63 (2019) 101406
distinct but overlapping categories: economic and political mechan-
isms. Economically, the main reasons why resource-based paths of de-
velopment inhibit long run economic growth are traced to the Dutch
disease phenomenon, the volatility of commodity prices, failures of
economic policy, and the neglect of education. Politically, the main
mechanisms are traced to rent seeking, weak institutions and corrup-
tion.
The most prominent economic channel of the paradox of plenty is
the Dutch disease phenomenon first developed by Gorden and Nearly
(1982); Gordon (1984). Dutch disease indicates the decline of the Dutch
manufacturing sector after the discovery of natural gas sources. Dutch
disease occurs when raw material booms increase domestic revenue and
the internal demand for goods and services. This income generates
appreciation of the real exchange rate and inflation. As a result, the
relative prices of non-resource commodities increase, and their export
becomes expensive relative to world market prices. This leads to a
decrease in the competitiveness of these non-resource commodities, and
in the investment they attract. This negative effect is called the
spending effect. In addition, internal domestic inputs such as labour and
materials are shifted to the natural resource sector. The prices of these
inputs increase in the domestic market. As a result, the production costs
of other traditional export sectors such as manufacturing and agri-
culture rise, contracting these sectors (Badeeb et al., 2017). This ad-
verse effect on non-resource sectors is called the resource pull effect
(Humphreys et al., 2007). In addition, natural resources can bypass
innovation when activities in the mining sector are higher than en-
trepreneurial activities. Natural resource rents may also inhibit GDP
growth through crowding out R&D, entrepreneurship or innovation.
Sachs and Warner (2001) suggest that wage privilege in the mining
sector may discourage innovators to engage in technology innovation,
R&D sector. Furthermore, several authors indicate that natural resource
wealth result crowding-out effect inhibiting technology innovation as
high wages offered by mining sector can serve to draw away scarce
skilled labour from other sectors of the economy, making it difficult for
them to compete. The same high wages can also create disincentives for
entrepreneurship, education, R&D, and technology innovation in other
sectors effectively degrading the pool of skilled labour that may be
necessary to develop agriculture and manufacture sectors (Wu et al.,
2018; Parlee, 2015; Namazi and Mohammadi, 2018).
The second economic channel through which the resource curse
may operate is the volatile nature of natural resource prices in global
markets. According to Ramey and Ramey (1995), volatility complicates
saving/investment decisions of economic agents and affects long-term
economic growth. Increased volatility in government revenues may also
call for higher levels of precautionary saving. Arezki and Gylfason
(2011) point out that revenues derived from raw materials transit di-
rectly to the government coffers through export tariffs, state ownership
and taxation. These revenues may be prone to rent-seeking behaviour
and not be saved or invested appropriately. They thus showed that
governments that can prevent misappropriation of raw materials and
promote governance play a crucial role in moderating the impact of
volatility on economic performance in countries well-endowed in nat-
ural resources. Bleaney and Halland (2014) suggest that both aid flows
and natural resources are associated with poor macroeconomic policy,
as measured by the volatility of public expenditure. In addition, access
to raw material rents distorts fiscal policy, leading to over expanded
government final consumption and general wastage when the extrac-
tion of resources is geographically concentrated. Following Dutt (2003)
and (Bianchi, 2004), high prices of exported natural resources may
favor economic growth by relaxing the trade balance constraint in the
short run. However, in the medium run, if the Marshall-Learner con-
dition holds true, the attempt to raise growth will induce small devel-
oping economies’ terms of trade to deteriorate and the price of raw
materials to decrease with respect to that of industrial goods. In the
long run, should terms of trade do not reach a long-run stable value.
The thesis of economic mismanagement is postulated by Gylfason
P.A.O. Henri
(2001); Iimi (2007); Ross (2007). These authors showed that raw ma-
terial revenues may imbue policymakers with overconfidence in their
countries. Ready access to natural resource revenues may relieve
pressures on governments regarding tax collection and the need for
fiscal discipline. Governments may exploit this reduced constraint on
expenditures or reduced need to impose non-resource taxes to offset
pressures they would otherwise face for political reforms. A curse
skeptic might argue that a government differently minded might pre-
cisely use resource rents to invest in needed infrastructures, or use re-
source rent windfalls to ease the implementation of needed political
reforms in Pareto improving. Resource rents may thus providegovern-
ments with greater scope for good or ill and not inherently be re-
sponsible for the ill. On the demand side, natural resource abundance
may also reduce people's incentives to accumulate human capital due to
high levels of non-wage income or resource-based wages (Badeeb et al.,
2017). Natural resource dependence may weaken public and private
incentives to accumulate human capital due to a high level of non-wage
income. For instance, in LDCs, the share of the labour force engaged in
primary production at all levels is inversely related to primary com-
modity abundance (Gylfason and Gylfason, 1999). In addition, across
economies, public expenditures on education in percentage of national
income, secondary-school enrolment rates and years of schooling are all
inversely related to primary commodities dependence (Gylfason, 2001).
People seek political rents when they try to obtain benefits for
themselves through their political influence. Many economists, such as
Gylfason (2001), Iimi (2007), argue that in some countries, the windfall
of resource revenues increases the power of elites, who have the ca-
pacity to widen income inequalities. The elites or powerful groups
generally take a large share of these revenues and distribute it for the
benefit of their immediate circles rather than investing it to upgrade
infrastructure and sustainable economic development. Windfall re-
source revenues are also considered a main cause for conflict between
domestic stakeholders such as politicians, local tribes, and citizens more
broadly (Badeeb et al., 2017).
The role of institutions in determining how natural resources affect
economic growth has been a point of divergence in the resource curse
literature. The success of resource-rich country like Botswana has
triggered researcher's attention to study the quality of institutions,
which plays a key role in the management of natural resources rents
(Corrigan, 2014). In Africa, weak institutions accounted for the slow
economic growth (Collier and Gunning, 1999) because natural resource
abundance negatively affects institutional quality (Sala-i-Martin and
Subramanian, 2008). For instance, when governments have less control
over natural resource quantities, institutional quality becomes the
crucial sole factor of results (El Anshasy and Katsaiti, 2013). However
strong institutions can reverse a resource-curse into a socio-political
and economic blessings (Robinson et al. (2005). In this case, natural
resources rents may increase economic growth and sustain physical and
human capital formation. In weak institutional economies, natural re-
sources impact negatively on both governance and economic develop-
ment. Indeed, many developing countries especially African countries
could not exploit their raw materials to developed their economies.
According to Arezki and Brückner (2011), natural resources increase
corruption and cause political instability, but at the same time, im-
proves civil rights and liberties. Natural resources also shape the choice
of developmental policies and political outcomes (Arezki and Nabli,
2012),. Indeed, oil hinders democratization and could even yield a
political curse because it allows the political elite to cultivate a culture
of patronage (Ross et al., 2012). More specifically, Awadallah and Adeel
(2011) have argued that the current volatility is caused by inefficient
state interventions. Natural resource rents may also hinder a country's
transition to democracy, because they increase the incentive and ability
of autocratic leaders to retain power. Such leaders are more prepared to
use repression or other means to avoid having to democratize or to
avoid losing power if they are compelled to hold elections. According to
Ross (2001), authoritarian regimes in resource-rich states can rely more
3
Resources Policy 63 (2019) 101406
on resource rents than tax revenues, which correspondingly weaken
public demand for democratic accountability(Badeeb et al., 2017).
A new approach of natural resources curses explains the paradox by
how multinational companies act. For instance, Amaeshi et al. (2014)
explore why and how multinational companies still pursue and enact
responsible business practices in Nigeria. They suggest that responsible
business practices in such contexts are often anchored on some corpo-
rate social responsibility mechanisms. Furthermore, Castelacci (2015)
analyzes the contrasting predictions of two competing views: the in-
stitutional voids and the organizational resilience theses on a large
sample of firms in Latin America. The results point out that the superior
innovation performance of group-affiliated firms is stronger for national
economies with more efficient financial, legal, and labour market in-
stitutions. Oil companies have, until recently, refused to address macro-
level governance issues. While the notion of non-involvement in gov-
ernment affairs has not radically changed. However since the year
2000, multinational oil companies (Shell, BP and Statoil) now recognize
that they can play a significant role in improving governance (Frynas,
2010).
In addition, The Extractive Industries Transparency Initiative (EITI)
membership has not resulted in reduced corruption scores (Kasekende
et al., 2016). Keblusek (2010) discusses the case of Nigeria where in-
depth financial, physical and process audits for the period 1999–2004
revealed serious irregularities but no one was held to account for these
by focusing solely on transparency on the revenue side. EITI ignores the
fact that patronage, one of the main avenues for corruption in resource
rich countries, relies on the lack of transparency associated with ex-
penditures rather than revenues.
The economic responsibilities of multinational companies in Africa
should be at the core of their corporate social responsibility priorities,
followed by philanthropic, legal and ethical responsibilities. It must be
noted that corporate social responsibility activities undertaken by
multinational companies in Africa have been criticized, for not ad-
dressing the root causes of development (Hamann and Kapelus, 2004;
Idemudia, 2008; Kolk and Lenfant, 2010). Another point of critique has
been the asymmetry between African governments and huge oil mul-
tinational companies, exemplified by comparing company's tax con-
tributions to government budget (UNCTAD, 2007). Furthermore, the
social and environmental responsibility quality which is always low
despite the large scale public concern expressed about the levels of the
environmental degradation caused by oil multinational company ac-
tivities (Odera et al., 2016).
While many African countries do not have a strong track record of
managing mineral wealth well, Ghana is often considered a model of
best practice, based on the government's distribution of a proportion of
mining rents to mining affected communities. However, corruption and
mismanagement by local authorities and traditional leaders undermine
this policy (Standing, 2014). Adams et al. (2018) used 222 cases of 18
Ghana's key petroleum stakeholders to investigate natural resource
curse factors. They find the extractive industries transparency initiative
membership and petroleum revenue management policies insufficient
to avert the resource-curse unless they are complemented with public
administration effectiveness, rule of law, regulatory quality, account-
ability, corruption controls, and effective accounting practices. In the
same country, Wanderley et al. (2008) used data from 227 samples of
local firms to show a strong improvement in local firms' uptake of
corporate social responsibility with corresponding improvement in FDI
inflow. Du and Vieira (2012) argue that oil multinational companies
use a variety of strategies to undertake corporate social responsibility
activities to gain legitimacy. Furthermore, Sikka (2010) showed that
multinational companies organized tax avoidance and this phenom-
enon has negative effects on development and GDP growth. Nigeria's
Oil Producing Area Development Commissions have failed to improve
the well-being of the people in oil producing communities. This phe-
nomenon is mostly caused by the Nigeria's shareholder activism and
politics (Frynas and Paulo, 2007; Idemudia, 2012). However,
P.A.O. Henri
Fig. 1. Natural resources rents and volatility of GDP per capita.
Note: lgdpcapitasd is the standard deviation of GDP per capita in logarithm; lnatusd is the standard deviation of natural resources rent. Source: Author with the data
of WDI (2018).
multinational companies' decisions regarding who to be trained tend to
be selective. Indeed, multinational companies' senior managers benefit
from high-profile training, most of which is internationally undertaken
with a huge cost, whilst local workers undergo such programs occa-
sionally and locally. In addition, during voluntarily or involuntary re-
dundancies, such local workers may not find another job as good as
their previous one, due to lack of continuous professional development
(Adams et al., 2019). Multinational companies in the resource sector
always reserve top management positions to their favourite managers
who may misrepresent information or alter reports to suit their personal
and principals' interests at the expense of local community development
(Gray, 2013). In addition, Adams et al. (2017) find that multinational
companies in the resource sector in the oil and gas sector continue to
extract raw materials and expand their market base without much re-
cognition to the social responsibility implications of their resource
Fig. 2. Natural resources rents and severity of crises.
Note: lgdpcapitamean is the minimum level of GDP per capita in logarithm; lnatusd is the minimum level of natural resources rents in logarithm. Source: Author with
the data of WDI (2018).
4
Resources Policy 63 (2019) 101406
extraction activities.
Despite the development problems in some of the oil rich Sub-
Saharan African countries, Kopiński et al. (2013) expect certain African
countries like Botswana or Ghana to achieve socio-economic progress
through the discovery of natural resources. They believe that Ghana's
natural resource cannot be a curse, but at worst, a treatable disease.
However, Adams et al. (2018) reveal weak institutional frameworks
within Ghana's oil sector. In addition, Adams et al. (2017) suggest that
natural resource abundance contributes to financial development. It is
these mixed effects of natural resources on development, coupled with
economic reforms (trade liberalization, political stability, control of
corruption) observed in certain African countries like Ivory Coast and
Ghana well-endowed in natural resources that justify this study. Con-
sequently, studies into the underlying causes of the paradox of plenty
reveal that there is a strong relationship between natural resources,
P.A.O. Henri
Fig. 3. Natural resources rents and GDP per capita.
Note: lgdpcapitamean is the average level of GDP per capita in logarithm; lnatu mean is the average level of natural resources rents in logarithm. Source: Author with
the data of WDI (2018).
Fig. 4. Natural resources rents and governance.
Note: governance is the average level of governance; lnatu is the average level of natural resources rents in logarithm. Source: Author with the data of WDI (2018)
and WGI (2018).
weak institutions, corruption, political instability, revenue misman-
agement, poverty and economic stagnation.
3. Methodology
In this section, the effect of natural resource rents on certain eco-
nomic and political indicators will be investigated using descriptive and
econometric analysis.
3.1. Descriptive analysis
Descriptive analysis establishes a relationship between natural re-
sources, volatility of certain indicators and the severity of crises. The
volatility is measured by the standard deviation of GDP per capita and
the severity of crises by the worst output drop of GDP per capita
(Acemoglu et al., 2003). Total natural resources rents is in percentage
of GDP that is the sum of oil rents, natural gas rents, coal rents (hard
and soft), mineral rents, and forest rents in percentage of GDP. The
relationship between natural resource rents, volatility and severity of
crisis will be first studied; followed by the relationship between natural
resources rents, governance, physical capital formation and enrolment
5
Resources Policy 63 (2019) 101406
in primary school.
3.1.1. Natural resource rents, volatility and severity of crises
Fig. 1 establishes a relationship between natural resources and vo-
latility and Fig. 2 establishes a relationship between natural resources
and severity of crises. Fig. 1 shows a negative relationship between
natural resources and standard deviation (a measure of volatility of
GDP per capita). In other words, resource-rich countries are not more
volatile despite the high volatility of raw material prices. However, the
severity of crises is observed in countries rich in natural resources since
Fig. 2 shows a negative relationship between natural resources rents
and minimum level of GDP per capital (the measure of severity of
crises). Fig. 3 shows that GDP per capita is low in resource-rich coun-
tries.
3.1.2. Natural resources rents, governance, physical capital formation and
enrolment in primary school
In Fig. 4, governance is the sum of the following six Worldwide
Governance Indicators: regulatory quality; political stability and ab-
sence of violence/terrorism; control of corruption; government effec-
tiveness; rule of law; voice and accountability (see Table 1). Fig. 4
P.A.O. Henri Resources Policy 63 (2019) 101406

Table 1
List of variables used, definition and sources.
Variable Definition Source

GDP per capita (constant 2010 US$)
Gross capital formation per head
Gross domestic savings (% of GDP)
Primary school enrolment
Inflation, consumer prices (annual %)
Total natural resources rents (% of GDP
General government final consumption
expenditure
Total population
Control of Corruption
Government Effectiveness
Political Stability and Absence of Violence/
Terrorism
Regulatory Quality
Rule of Law
Voice and Accountability
Foreign direct investment, net inflows (% of
GDP)
Domestic credit to private sector (% of GDP)
Labour force
Real effective exchange rate
Exports to developed countries (%of GDP)
Access to electricity
GDP per capita is divided by midyear population. GDP is the sum of gross value added by all resident producers in the WDI
economy plus any product taxes and minus any subsidies not included in the value of the products.
It consists of outlays on additions to the fixed assets of the economy plus net changes in the level of inventories
Gross domestic savings are calculated as GDP minus final consumption expenditure.
Gross enrolment ratio is the ratio of total enrolment, regardless of age, to the population of the age group that
officially corresponds to the level of education shown.
It reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and
services that may be fixed or changed at specified intervals, for example yearly.
It is given by the sum of oil rents, natural gas rents, coal rents (hard and soft), mineral rents, and forest rents.
General government final consumption expenditure includes all government current expenditures for purchases of
goods and services.
Total population is based on the de facto definition of population, which counts all residents regardless of legal status
or citizenship. The values shown are midyear estimates.
It captures perceptions of the extent to which public power is exercised for private gain, including both petty and WGI
grand forms of corruption, as well as “capture” of the state by elites and private interests. Ranging from approximately
−2.5 to 2.5.
It captures perceptions of the quality of public services, the quality of the civil service and the degree of its
independence from political pressures, the quality of policy formulation and implementation, and the credibility of
the government's commitment to such policies. Ranging from approximately −2.5 to 2.5.
It measures perceptions of the likelihood of political instability and/or politically-motivated violence, including
terrorism. Ranging from approximately −2.5 to 2.5.
It captures perceptions of the ability of the government to formulate and implement sound policies and regulations WGI
that permit and promote private sector development. Ranging from approximately −2.5 to 2.5.
It captures perceptions of the extent to which agents have confidence in and abide by the rules of society, and in
particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of
crime and violence. Ranging from approximately −2.5 to 2.5.
It refers to perceptions of the extent to which a country's citizens are able to participate in selecting their government,
as well as freedom of expression, freedom of association, and a free media. Ranging from approximately −2.5 to 2.5.
It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in WDI
the balance of payments.
It refers to financial resources provided to the private sector by financial corporations, such as through loans,
purchases of non-equity securities, and trade credits and other accounts receivable, that establish a claim for
repayment.
The labor force is the number of people who are employed plus the unemployed who are looking for work
The real effective exchange rate (REER) is the weighted average of a country's currency in relation to an index or
basket of other major currencies, adjusted for the effects of inflation. The weights are determined by comparing the
relative trade balance of a country's currency against each country within the index
Exports to developed countries represent the value of all goods and other market services provided to developed
countries in % of GDP.
Percentage of citizens who have electricity

Fig. 5. Natural resources rents and capital per head.

Note: lktete is the logarithm average level of physical capital per head; lnatu is the average level of natural resources rents in logarithm. Source: Author with the data
of WDI (2018).

shows a strong negative relationship between natural resources rents of rule of law or justice; bad quality of public services; bad regulation;
and governance. In other words, resource-rich countries have weak problem of voice and accountability; political instability, violence and
institutions. In annex (table 6), it is showed that the most institutional terrorism. It should also be noted that natural resources retard the
problems caused by natural resources are by order: corruption; problem physical and human capital formation in Africa. Since Figs. 5 and 6

6
P.A.O. Henri
Fig. 6. Natural resources rents and gross school enrolment in primary.
Note: school is gross enrolment ratio in primary; lnatu is the average level of natural resources rents in logarithm. Source: Author with the data of WDI (2018) and
Worldwide Governance Indicators (2018).
show that physical capita per head and gross school enrollment ratio in
primary are low in resource-rich countries.
3.2. Econometric analysis
To investigate the relationship between natural resources and in-
stitutional and macroeconomic indicators, the method developed by
Acemoglu et al. (2003) will be used. This method is chosen because it
permits to estimate the effect of a variable on another while controlling
the influence of other variables and the influence of time. This method
was always used to test the natural resource curse (Van der Ploeg et al.,
2009). The period is 1992–2016 because of the available data on gov-
ernance indicators.
The economic relationship of interest is:
X c, = Natuc , + Wc , + Ic, + Zc,
t 1, t t 1, t t 1, t t 1, t
+ log yc, t 1, + c, t 1, t
Where Xc; t-1; t is the variable of interest for country c between
times t and t-1. Natuc, t 1, t is total natural resources rents (% of GDP)
for country c between times t and t-1. The dependent variables are
overall volatility (standard deviation of the macroeconomic outcome),
the severity of crises (worst output drop) and the average growth rate
(the mean). Wc, t 1, t is a set of macroeconomic policies for country c
between times t and t-1: the measures of macroeconomic policies are:
average size of government consumption, inflation, and real exchange
rate. Ic, t 1, t is a measure of institutions for country c between times t
and t-1: the measures of institutions are the Worldwide governance
indicators including control of corruption, political stability and ab-
sence of violence/terrorism, regulatory quality, voice and account-
ability, rule of law and government effectiveness. Zc, t 1, t is a vector of
other controls variables, log yc, t 1, is the log of initial GDP per capita,
will included in some of the regressions. According to Barro (1999)
initial GDP per capita is included in growth regressions to control for
convergence effects. It is also useful to include it in regressions of vo-
latility or crises (Acemoglu et al., 2003). c, t 1, t is error term for
country c between times t and t-1. , , , , and are para-
meters to be estimated.
One strategy is to estimate equation (1) using ordinary OLS re-
gression. However, there are two problems with OLS regression: 1)
Certain independent variables such as macroeconomic policies or in-
stitutions variables are endogenous, 2. Governance indicators are
measured with error. For the above reasons, the two-stage least squares
(2SLS) will be used to estimate equation (1), with distinct and plausible
instruments for both macro policy variables and institutions. These
Resources Policy 63 (2019) 101406
instruments should be correlated with the endogenous regressors, and
they should be orthogonal to any other omitted characteristics and not
correlated with the error terms of equation (1).
In this paper, the lag of the endogenous regressors will be used as
instruments. Tables 4 and 5 and 6 show that the test of Sargan is not
significant. In other words, the instruments are not correlated with the
error term meaning that the instruments are valid. In addition, the
Kleibergen-Paap rk LM is significant at 1%. For this reason, the null
hypothesis that the first stage is under-identified can be rejected, so the
instruments are correct (see Tables 4 and 5, and 6). For each equation,
the independent/dependent variables and instruments are presented in
Table 2.
Another problem is that distortionary policy may matter for certain
macroeconomic variables (see Table 3). This would be the case if some
African economies go through a period of about 5–10 years of an
t 1, t overvalued exchange rate or high inflation, causing crises, but during
(1) other periods they experience low inflation and undervalued exchange
rates, making their average policies similar to those in other African
countries. To deal with this problem, equation will be estimated using a
panel of 5 years for each country between 1992 and 2016.
3.3. The Data
Data used in this study are from the World Bank, that is, the World
Development Indicators (WDI) and the Worldwide Governance
Indicators (WGI). The period of study is 1992–2016. The geographical
area of the study covers all African countries, except South Sudan,
Djibouti, Ethiopia, Lesotho, Somalia, Sao Tomé and Zambia. These
countries were excluded because of data availability.
It can be observed that for the period 1992–2016 (5 years panel),
African economies were more volatile. Indeed during this period, the
standard deviation of GDP per capita was high (2958.469). The average
level of natural resources rents in percentage of GDP is 13.177%. In
some countries, this statistic exceeds 69, 9% and its standard deviation
is 13.94. The value of real exchange rate is equal to 378 and the average
level of inflation in 10.2%. The average gross enrolment rate in primary
school is 91.7%. However, in certain countries like Mali or Eritrea, the
gross enrolment ratio in primary school sometimes does not exceed
22%. The average GDP (constant 2010 US$) is 3.06e+10 dollars. But in
some African countries, it does not exceed 2.69e+08 dollars. The
quality of governance is bad in Africa since the average values of the six
governance indicators are negative.
7
P.A.O. Henri Resources Policy 63 (2019) 101406

4. Econometric results

Lag variable

Lag variable

Lag variable

Lag variable

Lag variable
Instrument

4.1. Natural resources rents, volatility and crisis in Africa

4.1.1. Findings
The results are presented in Tables 4 and 5. It is observed that natural
and error of

and error of

and error of

and error of

and error of
resources rents reduce volatility but increase the severity of crises in
Africa. Indeed, the coefficients of natural resources rents are negative in
both volatility measured by standard deviation and severity of crises
Double causality

Double causality

Double causality

Double causality

Double causality measured by minimum value of GDP per capita. It should be recalled that
when the standard deviation increases the country experiences high vo-
Justification

latility and the severity of crises is high when the GDP per capita is at the
measure

measure

measure

measure

measure

worse level. In addition, this study also shows that economies with weak
institutions are more volatility. For example, the coefficients of govern-
ance indicators (control of corruption, political stability, voice and ac-
Physical capital formation, domestic credit to private sector, real exchange rate, resources rent, political stability,
Physical capital formation, inflation, labour force, domestic credit to private sector, real exchange rate, resources
Physical capital formation, inflation, real exchange rate, resources rent, political stability, control of corruption,

Physical capital formation, inflation, real exchange rate, resources rent, political stability, control of corruption,

countability and regulatory quality) are negative in equations of volatility

Domestic credit to private sector, natural resources rent, Aggregated indicator of governance, gross national

and positive in equations of severity of crises. This result implies that

standard deviation of growth per capita declines with governance and the
quality of institutions reduces the severity of crises.
Concerning the control variables, the effect of initial level of GDP per
voice and accountability, regulatory quality, exports to developed countries. electricity access

voice and accountability, regulatory quality, exports to developed countries. electricity access

capita is positive and physical investment volatility has a positive effect on

GDP per capita volatility. In other words, volatility decreases with GDP per
capita and increases with physical capital. In other words, resource rents
could be used to finance investments in LDCs that are capable of absorbing
them. The results also indicate that physical investment volatility has a
positive effect on GDP per capita volatility. The observation is made for
the following variables: electricity access and school enrolment. This could
be justified by the fact that growth is very intensive in physical capital in
Africa. The economic costs of physical capital volatility induced by natural
resources rents come from firms making uncertainty (Ramey and Ramey,
1995). These economic costs increase if it is costly to switch factors of
production between sectors. However, if enterprises choose to use dif-
ferent technologies with a higher expected return or if higher volatility
rent, Political stability, control of corruption

induces more investment. If productivity enhancing activities is are sub-

saving, GDP per capita, electricity access.

stitute to production, the opportunity cost of activity that generates pro-

ductivity growth is lower in recessions and thus volatility of natural re-
Endogenous independent variables

sources rents may boost GDP per capita growth (Aghion et al., 2006; Van
der Ploeg, 2010b).

4.1.2. Analysis
control of corruption

The link between natural resources and the severity of crises can be
explained by the fact that raw materials prices are more volatile and
justify why natural resources rents are so volatile. Crude petroleum
prices are extremely volatile than food prices and ores and metals prices
Specification of endogenous independent variables and instruments used.

(Aghion et al., 2006). However, other factors than natural resources

rents may explain GDP per capita volatility in Africa. For instance,
landlocked countries suffer much more from volatility. Following Van
initial GDP

initial GDP

initial GDP

initial GDP

der Ploeg et al. (2009), certain African countries who are less than
49 km from the nearest waterway have a standard deviation of growth
in GDP per capita that is 1.6% points lower than countries that are more
School enrolment,

School enrolment,

School enrolment,

School enrolment,

School enrolment,

than 359 km from the nearest waterway. In addition, remote countries

are more likely to have undiversified exports and to experience greater
volatility in output growth. Indeed, landlocked countries with a large
Exogenous

per capita

per capita

per capita

per capita

dependence on natural resources are typically less diversified and vul-

nerable to volatile world commodity prices. Koren et al. (2007) ex-
plained why LDCs are more volatile than developed countries. They
suggest four reasons why LDCs are extremely volatile than developed
Physical capital per head (mean)

countries: they specialize in extremely volatile sectors; specialize in

GDP per capita (minimum)

fewer sectors; experience more frequent and more severe aggregate

GDP per capita (standard

shocks; their macroeconomic fluctuations are more highly correlated

GDP per capita (mean)

with the shocks of the sectors they specialize in. The stylized facts
Governance (mean)

suggest that the structure of production shifts from more to less volatile
deviation)

sectors with GDP per capita growth. Also, the degree of specialization
Equation

declines in early stages of development and increases a little in later

Table 2

stages of development. Furthermore, the volatility of country-specific

macroeconomic shocks falls with development. Dutch Disease effects

8
P.A.O. Henri Resources Policy 63 (2019) 101406

Table 3
Descriptive statistics.
Source: Author with the data of WDI (2018) and WGI (2018).
Variable Obs Mean Std. Dev. Min Max

Natural resources rents (%of GDP) 316 13.177 13.94232 0 68.91213

Credit to private sector (%of GDP) 310 20.16224 22.62921 .543904 147.6133
Electricity access 307 50.220409 6.572072 25.963953 100
GDP 316 3.06e+10 6.63e+10 2.69e+08 4.52e+11
GDP per capita capita in dollars 316 2176.429 2958.469 122.8561 18075.18
Government final consumption (%of GDP) 307 16.00925 8.722854 2.057589 88.98288
Fixed capital formation (%of GDP) 308 21.05916 14.77498 −2.424358 219.0694
Gross fixe capital per head in dollars 308 9986350 1.92e+07 139149.5 2.27e+08
Gross national saving (%of GDP) 307 13.20294 20.17812 −141.9739 92.66588
Labour force 319 9303813 1.33e+07 42024 9.36e+07
Inflation 316 10.26915 346.3833 −15.4237 4800.532
Gross school enrolment in primary 253 91.70803 25.63062 21.53095 145.2491
Real effective exchange rate 283 378.5311 610.994 0 4801.083
Exports to developed countries (%of GDP) 311 61.74057 23.83703 1.133578 99.30738
Governance (sum of six indicators) 317 −3.897153 3.690403 −11.57613 5.279357
Control of corruption 320 -.5936616 .6359919 −1.647852 1.216737
Government effectiveness 317 -.6876129 .6382628 −1.891474 1.049441
Political stability 320 -.5557101 .9279212 −2.681914 1.219244
Regulatory quality 320 -.6550588 .6346157 −2.274259 1.091458
Rule of law 320 -.6857991 .6754838 −2.008507 1.044188
Voice and accountabilty 320 -.6552438 .7307267 −2.20278 1.015621

also induces volatility of real exchange rate and thus a fall in macro-
economic indicators such as, private investment and further contraction
of the traded sector and lower productivity growth.
The relationship between governance and volatility and severity of
crises can be explained as follows: a large causal effect of governance on
volatility is that governance have an effect on volatility and severity of
crises, but the macroeconomic policies (inflation and real exchange
rate) are the main mediating channel for this effect. For instance,
Johnson et al. (2000) found that investor protection measures were
significantly correlated with exchange rate depreciations and stock
market declines across emerging markets in 1997–1998. Indeed weak
institutions cause economic instability, and these institutional problems
lead to bad macroeconomic outcomes via a variety of mediating
channels. Distortionary macroeconomic policies are part of these
channels, or in other words, they are part of the tools that groups in
power use in order to enrich themselves and to remain in power. But
they are only one of many possible tools, and a variety of complex
factors, which we do not currently understand, determine which of
these tools get used in various circumstances. These macroeconomic
problems like volatility, inflation, unemployment, and the dis-
appointing macroeconomic performance suffered by these economies,
are symptoms of deeper institutional causes (Acemoglu et al., 2003).
Volatility decreases with GDP per capita because it is not necessarily
optimal for developing countries with low capital to establish funds
(Van der Ploeg, 2010b). In addition, less diversified economies like
African economies face higher risk of external shocks. Low levels of
diversification are associated with higher volatility and economies rich
in raw materials tend to have greater export concentration which itself
is strongly correlated with higher GDP per capita volatility. For this
reason, Joya (2015) showed that diversification minimizes GDP per
capita fluctuations that result from natural resources rents for a number
reasons. First, from a portfolio theory perspective, as the economy is
more diversified, opportunities for risk diversification through secto-
rally-diversified investment is stronger and hence output variance is
minimized. Second, depending on the substitutability of inputs, di-
versification makes it possible for firms to substitute inputs of one
sector with those of another. Overall, diversity of economies limits
propagation of shocks in the country. Third, in concentrated economies
with limited number of enterprises operating, linkages between en-
terprises are stronger, i.e. transactions between enterprises are higher.
Shocks to one sector transmit strongly to another, depending on the
share of intermediate goods in output and on the degree of com-
plementarity of inputs in the production process. Diversification thus
limits propagation of these shocks and reduces the impact of shocks on
aggregate output volatility.
4.2. Natural resources rents and average growth of GDP per capita in Africa
4.2.1. Findings
This study also shows that African economies countries that start off
with lower level of GDP per capita tend to grow faster than other
African countries, hence the negative sign of the variable initial GDP
per capita. This is aligned with the augmented Solow growth theory and
findings of other empirical studies. For the GDP per capita equation,
these regressions show the negative association between natural re-
sources rents and GDP per capita growth, after controlling for a number
of additional variables like gross capital formation, gross primary
school enrolment and indicators of governance. The estimated coeffi-
cient of the natural resources rents is −0128. This implies that an in-
crease of the mean of natural resources rents is associated with a re-
duction in growth of GDP per capita growth.
Further, physical capital investment is a strong determinant of
growth since the coefficient of gross fixed capital is positive and sig-
nificant at 1% and the variable electricity access (our indicator of in-
frastructures) is also significant at 1%. Human capital is also positive in
most regressions since the variable school enrolment is significant at
1%. There is a positive relation between GDP per growth and institu-
tional quality as the coefficient of variable governance is 0.541. This
result was explained by Rodrik (1999) and Tornell and Lane (1999).
According to them, governance directly affects the relative profitability
of unproductive and productive entrepreneurial.
4.2.2. Analysis
The above results confirm the paradox of plenty in Africa. Indeed, over
a 20-year period, natural resources rents can reduce per-capita GDP by
about 7%, other things constant (Sachs and Warner, 1999). In other words,
the positive effects of raw materials on GDP per capita growth are trumped
by their adverse indirect effects of volatility (Gelb, 1988). Indeed, primary
commodities are known to exacerbate GDP per capita volatility which has
a significant costs in terms decline in GDP per capita growth, increase in
inflation, volatility of final consumption, increase in public deficit, and
increase inequality and poverty. Ramey and Ramey (1995) found that

9
P.A.O. Henri Resources Policy 63 (2019) 101406

Table 4
Estimated effects of natural resources rents on volatility and on severity of crises.
VARIABLES lgdpcapitasd lgdpcapitamin

Standard deviation of Real effective exchange rate 0.0361

(0.0264)
Standard deviation of inflation 0.0938**
(0.0368)
Standard deviation of government final consumption 0.0670
(0.0582)
Standard deviation of fixed capital formation in % of GDP 0.181***
(0.0450)
Standard deviation of natural resources rents in % of GDP −0.125***
(0.0405)
Initial level of GDP per capita −1.205*** −0.0134
(0.120) (0.0133)
Standard deviation of political stability −0.521**
(0.212)
Standard deviation of voice and accountability −1.410***
(0.287)
Standard deviation of control of corruption −1.248***
(0.431)
Standard deviation of regulatory quality −0.709**
(0.308)
Standard deviation of gross school enrolment 0.218***
(0.0379)
Electricity access 5.249***
(0.393)
Standard deviation of Exports to developed countries (%of GDP) −0.0652
(0.0403)
Minimun value of natural resources rents in % of GDP −0.1794***
(0.0612)
Minimum value of fixed capital formation in % of GDP −0.0134***
(0.00505)
Minimum value of real effective exchange rate 0.0124***
(0.00326)
Minimum value of control of corruption 0.0216
(0.0176)
Minimum value of political stability 0.0346***
(0.00785)
Minimum value of voice and accountability 0.0538***
(0.0133)
Minimum value of regulatory quality 0.0893***
(0.0146)
Minimum value of school enrolment in primary 0.0135
(0.0174)
lenergyintm 0.740***
(0.0369)
Maximum value of inflation 0.0143***
(0.00395)
854 1044
0.96 0.9504
47 47
Kleibergen-paap rk LM testrk LM statistic 361,25(0,000) 437,39(0,000)
Sargan test 2,19(0,333) 1,85(0,4012)

Note: Standard errors in parentheses; ***p < 0.01, **p < 0.05, *p < 0.1.
Author with the data of WDI (2018) and Worldwide Governance Indicators (2018

volatility of natural resources rents adversely affects GDP per capita
growth. In fact, when an economy experiences higher volatility of natural
resources rents, it tends to have lower mean GDP per capita growth. The
core of the Dutch disease evidence is that natural resources dependence in
general shift resources away from sectors of the economy that have po-
sitive externalities for growth. There is supportive evidence that African
countries rich in natural resources tend to have a larger service sector and
smaller industrial sectors than African economies poor in natural resources
(Sachs and Warner, 1997). In addition, economies rich in raw materials
tend to experience slower GDP per capita growth in exports of manu-
factures (Sachs and Warner, 1997).
4.3. IV/3 Natural resources rents and institutions in Africa
4.3.1. Findings
Another result of this study is that institutions are weak in African
countries rich in natural resources. In other words, natural resources
rents may give rise to civil conflict, cause political instability and
conflicts, affect political structures and incentives. This result implies
that natural resources rents are associated with poor macroeconomic
policy. Indeed, raw material abundance weakens the institutions, da-
mages democracy, increases the probability of civil war, encourages
bad regulation policies, and leads to poor development outcomes.
4.3.2. Analysis
In the absence of strong legal-political institutions, natural resources
rents contribute more to the deterioration of the quality of the in-
stitutions. Tornell and Lane (1999) present a theoretical model in
which, politically powerful groups are able to shift natural resources
rents to a less efficient, but untaxable, informal sector. For example,
Torvik (2002) and Olsson (2007) showed that if institutions are weak,
raw materials draw other production factors away from constructive

10
P.A.O. Henri Resources Policy 63 (2019) 101406

Table 5
Estimated effects of natural resources rents on governance, GDP per capita and physical Capita per head.
VARIABLES Gdp per capita K per head Governance
(mean) (mean) (mean)

Natural resources rents in % of GDP (mean) −0.128*** −0.714*** −1.049***

(0.0242) (0.0647) (0.117)
Agrgated indicator of governance (mean) 0.0227*** 0.0668***
(0.00803) (0.0158)
Gross national saving (mean) 0.0662*** 0.153***
(0.0237) (0.0524)
GDP per capita (mean) −0.219
(0.147)
Initial value of GDP per capita −0.940*** 0.524***
(0.0551) (0.187)
Credit to private sector in % GDP (mean) 0.186***
(0.0321)
Gross school enrolment in primary (mean) 0.172*** 0.553*** 0.553***
(0.0465) (0.0627) (0.190)
Gross fixe capital per head (mean) 0.175*** 0.427***
(0.0524) (0.107)
Electricity access 0.147***
(0.0353)
Governance 0.541*** 0.432***
(0.121) (0.101)

Observations 820 805 812

R-squared 0.92 0.91 0.90
Number of pays 47 47 47
Kleibergen-paap rk LM test 345,5(0,000) 402,9(0,000) 388(0,000)
Sargan test 2,24(0,312) 1,78(0,488) 1,95(0,4016)

Note: Standard errors in parentheses; ***p < 0.01, **p < 0.05, *p < 0.1.
Author with the data of WDI (2018) and Worldwide Governance Indicators (2018).

uses towards destructive rent-seeking. Following Murshed (2004),
natural resources rents lead to political instability and rent seeking in
economies with weak institutions, or that the elite deliberately seeks to
undermine institutions so as to facilitate kleptocracy. In Robinson et al.
(2005), because of natural resources, public administrations drive re-
sources towards bloated sectors that act as vehicles of rent distribution,
thus diverting national income away from more socially fruitful eco-
nomic activity. Furthermore, huge primary goods may create oppor-
tunities for corruption on a large scale on the part of industries and
public institutions. A related idea is that natural resource rents en-
courage corruption, leading to over expanded general wastage distorts
fiscal policy when natural resources extraction are geographically
concentrated (Bleaney and Halland, 2014). Brunnschweiler and Bulte
(2008) explained that the quality of institutions is endogenous to raw
materials abundance. Raw materials might induce more rent-seeking,
increase political conflicts and the likelihood of bad macroeconomic
policies, and hinder the functioning of democratic institutions (Barro,
1999; Collier and Hoeffler, 2005). That is natural resources damage
development and democratization in authoritarian regimes (Al-Ubaydl,
2012). Another case involves foreign countries invading with destruc-
tive consequences and the accompanying defence expenditures
(Gylfason and Zoega, 2006).
4.4. Natural resources rents and physical capital accumulation in Africa
4.4.1. Findings
The effect of natural resources rents on physical capital accumula-
tion is also negative as the coefficient of natural resources rents is
−0.714. This means that natural resources booms crowd out physical
capital and have a negative effect on economic growth. Indeed, raw
materials abundance hampers GDP per capita abundance by cutting
national saving and reducing investment in the long run.
4.4.2. Analysis
This negative effect of natural resource rents on human and physical
capital has been explained by Gylfason and Zoega (2006). According to
them, raw materials booms can also reduce GDP per capita growth by
lowering the accumulation of technological knowledge and with-
drawing productive resources out of manufacturing. Increase in na-
tional income due to raw materials discoveries may lead to sloth and
reduced awareness of the need for governance (Sachs and Warner,
1995; Gylfason, 2001). It may also create a false sense of security and
weaken the perceived need for physical capital accumulation, human
capital formation, and growth-promoting strategies. Natural resources
rents may also reduce physical capital in manufacturing sector because
non-primary exports are often harmed by an appreciation of the real
exchange rate. Consequently, raw materials abundant economies
usually experience a drop in manufacturing and other non-primary
exports. Primary commodities may crowd-out industrial activity by
encouraging economics agents to work in the primary sector and it thus
directs physical capital away from the manufacturing sector into the
primary sector (Papyrakis and Gerlagh, 2007).
5. Conclusion
The purpose of this article was to identify the institutional and
macroeconomic indicators that are more worsen by natural resources
rents. The study begun by the literature review and the methodology.
The author used the two-stage least squares (2SLS) and the data of
World bank (WDI and WGI) for the period 1992–2016.The results show
that the most institutional problems caused by natural resources rents
are by order: corruption; problem of rule of law or justice; bad quality
of public services; bad regulations; problem of voice and accountability;
political instability. Natural resources also cause volatility of GDP per
capita, lead to low level of physical and human capital accumulation.
For these reasons, African countries should promote good governance
and diversify their economies. In other to improve performance in re-
source sector, our future research will identify the key macroeconomic
indicators that are more volatile because of natural resource rents in
Africa.

11
P.A.O. Henri Resources Policy 63 (2019) 101406

Appendix A. Supplementary data

Supplementary data to this article can be found online at https://doi.org/10.1016/j.resourpol.2019.101406.

Annex. Annex

Table 6
Correlation between natural resources rents and the six indicators of governance

natu corr law stapo regu voice gov

natu 1.0000
corr −0.5172 1.0000
law −0.5140 0.8426 1.0000
stapo −0.3530 0.6353 0.7788 1.0000
regu −0.4755 0.7309 0.8472 0.6290 1.0000
voice −0.4237 0.6751 0.7729 0.6277 0.7396 1.0000
gov −0.4867 0.8075 0.8631 0.6490 0.8581 0.7026 1.0000

Source: Author with the data of WDI (2018) and WGI (2018).

References
Acemoglu, D., Johnsonb, S., Robinson, J., Thaicharoen, Yunyong, 2003. Institutional
causes, macroeconomic symptoms:volatility, crises and growth. J. Monet. Econ. 50,
49–123.
Adams, K., Nyuur, R.,B., Ellis, F.Y.,A., Debrah, Y.,A., 2017. South African MNCs' HRM
systems and practices at the subsidiary level: insights from subsidiaries in Ghana. J.
Int. Manag. 23 (N° 2), 180–193.
Adams, D., Ullah, S., Akhtar, P., Adams, K., Saidi, S., 2018. The role of country-level
institutional factors in escaping the natural resource curse: insights from Ghana.
Resour. Pol. 55. https://doi.org/10.1016/j.resourpol.2018.03.005.
Adams, D., Adams, K., Ullah, S., Ullah, F., 2019. Globalisation, governance, account-
ability and the natural resource ‘curse’: implications for socio-economic growth of oil-
rich developing countries. Resour. Pol. 61, 128–140.
Aghion, P., Bacchetta, P., Rancière, R., Rogoff, K., 2006. Exchange Rate Volatility and
productivity Growth: the Role of Financial Development. CEPR, London Discussion
Paper N°. 5629.
Al-Ubaydl, O., 2012. Natural resources and the tradeoff between authoritarianism and
development. J. Econ. Behav. Organ. 81, 137–152.
Amaeshi, K., Adegbite, E., Rajwani, T., 2014. Corporate social responsibility in challen-
ging and non-enabling institutional contexts: do institutional voids matter? J. Bus.
Ethics 134 (N°1), 135–153.
Arezki, R., Brückner, M., 2011. Oil rents, corruption, and state stability: evidence from
panel data regressions. Eur. Econon. Rev. 55 (N°7), 955–963.
Arezki, R., Gylfason, T., 2011. Commodity price volatility, democracy and economic
growth. In: de La Grandville, Olivier (Ed.), Frontiers of Economics and Globalization,
Economic Growth and Development. Emerald Group, pp. 9–24.
Arezki, R., Nabli, M.N., 2012. Natural resources, volatility, and inclusive growth:
Perspectives from the middle east and north Africa. In: IMF Working Paper, WP/12/
111.
Awadallah, B., Adeel, M., 2011. The Economics of the Arab Spring. Center for the Study of
African Economies (CSAE), Oxford Working Paper WPS/2011 23.
Badeeb, R.,A., Lean, H.,H., Clark, J., 2017. The evolution of the natural resource curse
thesis: a critical literature survey. Resour. Poll 51, 123–134.
Balassa, B., 1980. The Process of Industriel Development and Laternative Development
Strategies. Princeton University, Princenton NJ.
Barro, R.J., 1999. Determinants of democracy. J. Political Econ. 107 (N°6), PP158–183.
Bianchi, C., 2004. The Growth Performance and Prospects in Europe: a Kaldorian
Approach, vol. 164. Quaderni di Ricerca del Dipartimento Di Economia Politica e
Metodi Quantitativi, pp. 112–135 N°2.
Bleaney, M., Halland, H., 2014. Natural resources exports, fiscal policy volatility and
growth. Scot. J. Polit. Econ. 61 (5), 502–522.
Brunnschweiler, C.N., Bulte, E.H., 2008. The resource curse revisited and revised: a tale of
paradoxes and red herrings. J. Environ. Econ. Manag. 55 (N°3), 248–264.
Bruno, M., Sachs, J., 1982. Energy and resource allocation: a dynamic model of Dutch
disease. Rev. Econ. Stud. 49, 845–859.
Castelacci, F., 2015. Institutional voids or organizational resilience? Business
Groups,Innovation, and market development in Latin America. World Dev. Vol. 70,
43–58 2015.
Corden, W.,M., Nearly, J. p., 1982. Booming sector and de-industrialisation in small open
economy. Econ. J. 92, 825–848.
Collier, P., Gunning, J.W., 1999. Explaining African economic performance. Jl Economl
Litertl 37 (1), 64–111.
Collier, P., Hoeffler, A., 2005. Resource rents, governance, and conflict. J. Confl. Resolut.
49 (N°4), 625–633.
Corrigan, C.C., 2014. Breaking the resource curse: transparency in the natural resource
sector and the extractive industries transparency initiative. Resour. Pol. 40 (2),
17–30.
Deaton, A., 1999. Commodity prices and growth in Africa. J. Econom. Perspect. 13,
23–40.
Du, S., Vieira, E.T., 2012. Striving for legitimacy through corporate social responsibility:
insights from oil companies. J. Bus. Ethics 110, 413–427.
Dutt, A.,K., 2003. Income elasticities of imports, North–South trade and uneven devel-
opment. In: Dutt, A.K., Ros, J. (Eds.), Development Economics and Structuralist
Macroeconomics: Essays in Honour of Lance Taylor. Edward Elgar, Cheltenham.
El Anshasy, A.A., Katsaiti, M.-S., 2013. Natural resources and fiscal performance: does
good governance matter? Journal of Macroeconics 37, 285–298.
Frankel, J.A., 2010. The Natural Resource Curse: A Survey. National Bureau of Economic
Researchhttps://doi.org/10.3386/w15836. Working Paper N° 1583.
Frynas, J.G., 2010. Corporate social responsibility and societal governance: lessons
fromtransparency in the oil and gas sector. Journal of Busness Ethics 93, 163–179.
Frynas, J.G., Paulo, M., 2007. A new scramble for African oil? Historical, political, and
business perspectives. Afrcan Affairs 106 (423), 229–251.
Gelb, A., 1988. Oil Windfalls: Blessing or Curse. Oxford University Press, New York, NY.
Gorden, W.,M., Nearly, J. p., 1982. Booming sector and de-industrialisation in small open
economy. Econ. J. 92, 825–848.
Gordon, W.,M., 1984. Booming sector and and Dutch disease economics: a survey and a
consolidation. Oxf. Econ. Pap. 36 (3), 359–380.
Gray, R., 2013. Back to basics: what do we mean by environmental (and social) ac-
counting and what is it for? A reaction to Thornton. Crit. Perspect. Account. 24 (N°6),
459–468.
Gylfason, T., 2001. Natural Resources, Education, and Economic Development, vol. 45.
European Economic Review, pp. 847–859.
Gylfason, T., 1999. In: Exports, Inflation, and Growth. vol. 27. World Development, pp.
1031–1057.
Gylfason, T., Zoega, Gylfi, 2006. Natural resources and economic growth: the role of
investment. World Econ. https://doi.org/10.1111/j.1467 9701.2006.00807.x.
Hamann, R., Kapelus, P., 2004. Corporate social responsibility in mining in southern
Africa: fair accountability or just greenwash. Development 47 (N°3), 85–92.
Havranek, T., Horvath, R., Zeynalov, Aya, 2016. Natural resources and economic growth:
a meta-analysis. World Dev. https://doi.org/10.1016/j.worlddev.2016.07.016.
Humphreys, M., Sachs, J., Stiglitz, J.E., 2007. Escaping the Resource Curse Columbia.
University Press, New York, pp. 11–13.
Idemudia, U., 2008. Oil extraction and poverty reduction in the Niger delta: a critical
examination of partnership initiatives. J. Bus. Ethics 90 (N°1), 91–116.
Idemudia, U., 2012. The resource curse and the decentralization of oil revenue: the case
of Nigeria. J. Clean. Product.n 35, 183–193.
Iimi, A., 2007. Escaping from the Resource Curse: Evidence from Botswana and the Rest
of the World. IMF Staff Papers, pp. 663–699.
Johnson, S., Boone, P., Breach, A., Friedman, E., 2000. Corporate governance in the Asian
financial crisis. J. Financ. Econ. 58 (N°1–2), 141–186.
Joya, O., 2015. Growth and volatility in resource-rich countries:Does diversification help?
Struct. Change Econ. Dynam. 35, 38–55.
Kasekende, E., Abuka, C., Sarr, M., 2016. Extractive industries and corruption: in-
vestigating the effectiveness of EITI as a scrutiny mechanism. Resour. Pol. 48,
117–128.
Keblusek, M.,E., 2010. Is EITI really helping improve global good governance? In:
Examining the Resource Curse, Corruption, and Nigeria's EITI Implementation
Experience, . http://nidprodev.org/EITI%20-%20Nigeria%20Analysis.pdf.
Kolk, A., Lenfant, F., 2010. MNC reporting on CSR and conflict in central Africa. J. Bus.
Ethics 93 (N° 2), 241–255.
Kopiński, D., Polus, A., Tycholiz, W., 2013. Resource curse or resource disease? Oil
inGhana. Afr. Aff. 112 (N° 449), 583–601.
Koren, M., Tenreyro, S., 2007. Volatility and development. Q. J. Econ. 122 (1), 243–287.
Krugman, P., 1987. The narrow moving band, the Dutch disease and the competitive
consequences of Mrs Thatcher: notes on trade in the presence of dynamic scale
economies. J. Dev. Econ. 27 (1/2), 41–55.
Matsuyama, K., 1992. Agricultural productivity, comparative advantage, and economic
growth. J. Econ. Theory 58 (2), 317–334.

12
P.A.O. Henri
Mehlum, H., Moene, K., Torvik, R., 2006. Cursed by resources or institutions? World
Econ. 29 (N°8), 1117–1131.
Murshed, S.M., 2004. When Does Natural Resource Abundance Lead to a Resource Curse.
IIED-EEP Working Paper 04-01. www.iied.org.
Murshed, S.,M., Serino, L.,A., 2011. The pattern of specialization and economic growth:
the resource curse hypothesis revisited. Struct. Change Econ. Dynam. 22, 151–161.
Namazi, N., Mohammadi, E., 2018. Natural resource dependence and economic growth: a
TOPSIS/DEA analysis of innovation efficiency. Resour. Pol. 58, 544–552.
Odera, O., Scott, A., Gow, J., 2016. An examination of the quality of social and en-
vironmental disclosures by Nigerian oil companies", corporate governance. Int. J. Bus.
Soc. 16 (N° 2), 1–30.
Olsson, O., 2007. Conflict diamonds. J. Dev. Econ. 82, 267–286.
Papyrakis, E., Gerlagh, R., 2007. Resource abundance and economic growth in the United
States. Eur. Econ. Rev. 51, 1011–1039.
Parlee, B.,L., 2015. Avoiding the resource curse: indigenous communities and Canada's
sand. World Dev. 74, 425–436.
Ramey, G., Ramey, V., 1995. Cross-country evidence on the links between volatility and
growth. Am. Econ. Rev. 85 (N° 2), 1138–1151.
Robinson, J., Torvik, R., Verdier, T., 2005. Political foundations of the resource curse. J.
Dev. Econ. 79, 447–468.
Rodrik, D., 1999. Where did all the growth go? External shocks, social conflict, and
growth collapses. J. Econ. Growth 4 (4), 385–412.
Ross, M., 2001. Does oil hinder democracy? World Policy 53, 325–361.
Ross, J., 2005. Divergence and growth collapses: theory and empirical evidence. In:
Antonio Ocampo, José (Ed.), Beyond Reforms, Structural Dynamics and
Macroeconomic Vulnerability. Stanford University Press, Stanford, pp. 211–232.
Ross, M., 2007. How mineral-rich states can reduce inequality. In: Humphreys, M., Sachs,
J., Stiglitz, J. (Eds.), Escaping the Resource Curse. Columbia University Press, NY, pp.
236–255.
Ross, M., Mazaheri, Nimah, Kaiser, Kai, 2012. The Resource Curse in MENA? Resource
Wealth, Economic Shocks, and Conflict Risk. World Bank, Washington World Bank
Policy Research Working Paper No. 5742.
Rostow, W., 1961. The Stages of Economic Growth: A Non-comminist Manifesto.
Cambridge University Press, Cambridge.
Sachs, J.D., Warner, A.,M., 1995. Natural Resource Abundance and Economic Growth”,
NBER Working Papers 5398. National Bureau of Economic Research.
13
Resources Policy 63 (2019) 101406
Sachs, J., Warner, A., 1997. Sources of slow growth in African economies. J. Afr. Econom.
6 (N°3), 335–380.
Sachs, J., Warner, A.,M., 1999. The big push, natural resource booms and growth. J. Dev.
Econ. 59, 43–76.
Sachs, J.D., Warner, A.M., 2001. The curse of natural resources. Eur. Econ. Rev. 45 (N°1),
827–838.
Sala-i-Martin, X., Subramanian, A., 2008. Addressing the natural resource curse: an il-
lustration from Nigeria. In: Economic Policy Options for a Prosperous Nigeria.
Palgrave Macmillan, London, pp. 61–92.
Shahbaz, M., Naeem, M., Ahad, M., Tahir, I., 2017. Is natural resource abundance a sti-
mulus for financial development in the USA? Resour. Pol. 55, 223–232.
Sikka, P., 2010. Smoke and mirrors: corporate social responsibility and tax avoidance.
Account. Forum 34 (3–4), 153–168.
Standing, A., 2014. Ghana‫׳‬s extractive industries and community benefit sharing: the case
for cash transfers. Resour. Pol. 40, 74–84.
Tornell, A., Lane, P.R., 1999. The voracity effect. American Economic Review 89 (1),
22–46.
Torvik, R., 2002. Natural resources, rent-seeking and welfare. J. Dev. Econ. 67, 455–470.
UNCTAD, 2007. World Investment Report 2007. Transnational Corporations. Extractive
Industries and Development, United Nations, New York and Geneva.
Van der Ploeg, F., 2010a. Aggressive oil extraction and precautionary saving: coping with
volatility. J. Public Econom. 94, 421–433.
Van der Ploeg, F., 2010b. Natural Resources: curse or a blessing. J. Econ. Lit. 49 (N° 2)
466-420.
Van der Ploeg, F., Poelhekke, S., 2009. Volatility and the Natural Resource Curse, vol. 61
Oxford Economic Papers, New Series No. 4 (October 2009).
Wanderley, L.S.O., Lucian, R., Farache, F., Filho, J.M., De, S., 2008. CSR information
disclosure on the web: a context-based approach analysing the influence of country of
origin and industry sector. J. Bus. Ethics 82, 369–378.
WDI, 2018. World Development Indicators. https://databank.worldbank.org/data/
source/world-development-indicators.
WGI, 2018. Worldwide Governance Indicators. https://databank.worldbank.org/data/
source/worldwide-governance-indicators.
Wu, S., Li, L., Shantong Li, S., 2018. Natural resource abundance, natural resource-or-
iented industry dependence, and economic growth: evidence from the provincial
level in China. Resour. Conserv. Recycl. 139, 163–171.