Resource Rents, Human Development and Economic Growth in Sudan

Abstract

This study investigates the relationship between natural resource rents, human development and economic growth in Sudan using co-integration and vector error correction modelling (VECM) over the period 1970–2015. Institutions proved to play a role in determining a difference in whether a country is cured or blessed by resource abundance. In the case of Sudan, no time series data is available on institutional quality and is therefore excluded from the analysis. The role of institutions and macroeconomic policies is captured by other variables included in the empirical model. Co-integration tests confirm the existence of a long run equilibrium relationship between resource rents, human development and economic growth in Sudan. Empirical evidence from the estimated VECM shows that economic growth is positively affected by resource rents and development expenditure but surprisingly negatively affected by life expectancy at birth in the short run. In the long run, resource rents, school enrolment, life expectancy and financial development have negative significant effects on economic growth. Only development expenditure is found to affect economic growth positively. Resource rents are found to weaken education and health levels and this is indirectly channeled into negative effects of resource rents on economic growth. These results suggest that the government has been neglecting investments to build up human capital necessary for inclusive growth. Long run Granger causality tests show a unidirectional causal relationship running from resource rents to GDP growth as well as from development expenditure to GDP growth. School enrollment, life expectancy and financial development are found to be negatively Granger causing GDP growth. Long run causal relationships reconfirm that a resource curse exists indirectly mediated by weak human capital. The study recommends that the government should manage natural resource rents with a policy framework supporting creation of a virtuous economic circle between human development and economic growth. If pursued, this would promote sustained, inclusive and equitable growth in Sudan.

The causative relationship between natural resource rent and economic growth: evidence from Ghana’s crude oil resource extraction

“…Again, this result is consistent with the The results revealed that reported that there is no nonlinear causality between oil resource rent and economic growth. Thus, the nonlinear Granger causality test provided evidence supporting no nonlinear causal relationship between oil resource rent and economic growth which is consistent with Quixina and Almeida (2014) but inconsistent with Mohamed (2020). This finding might be as a result of the weak asymmetries detected in our data.…”

“…In line with the aim of the study, we focus on related studies that examine the relationship between natural resource extraction (oil production specifically) and economic growth. While some studies used the traditional Granger causality approach to examine the causal relationship between oil resource rent and economic growth (Quixina and Almeida, 2014; Apergis et al , 2014; Parvin Hosseini and Tang, 2014), other studies followed the Vector error correction model as estimation strategy to examine the causative relationship between oil resource rent and economic growth (Hamdi and Sbia, 2013; Mohamed, 2020; Ben-Salha et al , 2018). The outcome for these studies that used the Granger causality have been mixed as some studies found a unidirectional causal relationship from oil revenue and non-oil gross domestic product (GDP) (Quixina and Almeida, 2014; Parvin Hosseini and Tang, 2014) while other studies found bidirectional causative relationship between oil production and GDP (Apergis et al , 2014).…”

Natural resources volatility and South Asian economies: Evaluating the role of COVID-19

“…illustrate that natural resources could act as blessings unless the institutional quality and education are not performing to the quality level. In the case of ( Mohamed, 2020 ), the vector error correction approach was used between the 1970–2015 period and revealed that natural resources are blessings to economic growth. However, these natural resources negatively affect education level and health in the study region.…”

“…unveil that volatility in the crude oil market prices significantly causes volatility in the agriculture commodity futures of China. Regarding environmental degradation, the recent study of ( Mohamed, 2020 ) illustrates that an increase in oil prices reduces environmental degradation in the oil-importing economies due to a reduction in oil demand and economic and industrial activities. However, this increase in oil prices positively affects environmental degradation in the oil-exporting economies.…”

The paradox of governance and natural resource rents in Sub-Saharan Africa

“…The positioning of this study departs from extant contemporary literature, which has focused on, inter alia, the nexuses between natural resource rents, economic growth and human development (Sinha & Sengupta, 2019;Mohamed, 2020); the challenge of governance in the light of natural resources rents (Fagbemi & Adeoye, 2020); the effect of natural resources on labour shares (Al-Marhubi, 2020); connections between natural resources, institutional quality, indebtedness and manufacturing (Amiri, Samadian, Yahoo & Jamali, 2019;Muhanji, Ojah & Soumaré, 2019); insights into the natural resource curse (Henri, 2019); secession with natural resources (Dhillon, Krishnan, Patnam & Perroni, 2020); how oil wealth affects development in the long term (Cassidy, 2019); intensive and extensive margins of mining and development (Mano, Bhattacharyya& Moradi, 2019) and the nexus between resource discovery and the political fortunes of national leaders (Bhattacharyya & Keller, 2020).…”