Natural Resources, Governance, and Economic Growth in Africa

Development economists have found evidence that an abundance in natural resources hinders economic growth, contrary to conventional expectations. This finding is called the resource curse hypothesis. The major questions this paper addresses are: does the resource curse hypothesis apply to Africa? If so, what are its major channels? Our hypothesis is that governance is much more important in Africa than in other regions because of non-democratic and unstable political environments, which are closely associated with natural resources in African countries and hinder economic growth. We find empirical evidence for this argument using GMM with endogenous governance. Our findings shed light on the deleterious role of natural resources in governance and economic growth in Africa