Economic growth dynamics between resource‐rich and resource‐poor countries in sub‐Saharan Africa: The role of politics and institutions

Abstract

This paper employs the system generalized method of moments to examine the diversity of economic growth in 33 resource-rich and resource-poor countries in sub-Saharan Africa (SSA) over the period 1996-2017. The last decade has witnessed resource-poor countries such as Rwanda and Ethiopia sustain impressive economic growth while resource-rich countries such as Nigeria and the Democratic Republic of the Congo continue to struggle. On the other hand, non-oil resource-rich countries such as Botswana and Namibia record steady economic growth rates. Are resource-rich countries better off? Or is there sufficient evidence in support of the resource curse phenomenon in SSA? We examine the resource curse hypothesis and the effects of political and institutional variables in explaining economic growth in SSA. We find that resource-rich countries grow at an annual average of 1.3% more than resourcepoor countries. Furthermore, we find strong complementarity between institutional quality and economic growth in resource-rich countries; a stable democracy, political stability, and periodic rotation of political power are critical prerequisites in sustaining economic growth in resource-rich countries in SSA. Overall, the findings suggest weak evidence in support of the resource curse phenomenon in SSA. 1 | INTRODUCTION Recent developments in macroeconomics and progressive empirical research on the causes of medium-to long-term economic growth stress the increasing recognition and influence of non-economic factors in explaining the dynamics and observed heterogeneity in crosscountry growth studies (Clark & Juma, 2013; Sala-i-Martin, Doppelhofer, & Miller, 2004). Non-economic factors are growth-endogenous, and vary significantly across countries and generate the context-specific characteristics of economic growth and development. Furthermore, the failure of growth models and policies that were hitherto successful in other emerging economies on the continent of Africa lend credence to the endogeneity of economic growth (Comaroff & Comaroff, 2015).

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