Natural resource abundance, governance, and government expenditure: Empirical insights from environmental sustainability

Abstract

This study examines the quest for environmental sustainability in Africa by analyzing the roles of natural resource abundance, governance quality, and government expenditure. It explores the relationships between these variables, employing the N‐shaped hypothesis across 42 African countries from 1986 to 2020 grouped into resource‐rich and resource‐poor countries. Utilizing the Lewbel 2SLS modeling technique, the research evaluates how these factors interact and impact carbon and nitrous emissions in the region. The findings reveal distinct patterns: resource‐poor countries exhibit an N‐shaped relationship between natural resource abundance and emissions. In contrast, resource‐rich countries show such patterns between government expenditure and carbon emissions. Moreover, in resource‐rich countries, higher natural resource abundance, government expenditure, and governance effectiveness tend to increase carbon emissions but decrease nitrous emissions. Conversely, in resource‐poor economies, carbon emissions decrease with natural resource abundance and governance quality but increase with government expenditure and effectiveness. Additionally, regulatory quality positively correlates with nitrous emissions across all contexts. The study's insights offer valuable guidance for policymakers aiming to foster environmental sustainability, emphasizing tailored strategies based on the diverse impacts of natural resources, governance, and government spending across different economic contexts.