Institutions, economic growth and natural resources in Sub-Saharan African countries Online publication date: Mon, 26-Feb-2018
by Dorothé Yong Ngondjeb; Jean Hugues Nlom
International Journal of Sustainable Development (IJSD), Vol. 20, No. 3/4, 2017
Abstract: The present study explores a sub-mechanism by which growth is implicitly slowed down: efficiency of institutions due to the illicit outflow of capital. This paper uses previously defined models of rent-seeking behaviour in resource-abundant economies to explain the observed effects. The empirical analysis explores direct linkages between institutions, economic growth and natural resource rents in a panel dataset of 32 Sub-Saharan African countries between 1980 and 2010. The study tests the hypothesis that countries more dependent on natural resources exhibit higher levels of illicit capital outflows. The result indicates that an increase in natural resource rents by one percentage point increases the capital flight-to-GDP ratio by approximately 12.9%. This relationship still holds even when control variables are introduced. These results can be attributed both to the effect of natural resource endowments on the political and economic climate, and to the aforementioned mechanism through which resources slow growth over time.
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