IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v79y2022ics0301420722004858.html
   My bibliography  Save this article

Natural resource dependence and the Dutch disease: Evidence from Sub-Saharan Africa

Author

Listed:
  • Asiamah, Oliver
  • Agyei, Samuel Kwaku
  • Ahmed, Bossman
  • Agyei, Ellen Animah

Abstract

The natural resource endowment in Sub-Saharan Africa (SSA) countries has not been reflected in the growth and development of these countries. Some of the main channels through which natural resource dependence may inhibit economic growth have been suggested to include the Dutch disease and the pull effect mechanisms. Dwelling on this background, we empirically test the validity of the Dutch disease and pull effect hypotheses in SSA by examining the effect of natural resource dependence on the growth of the manufacturing, services, and agricultural sectors, and the overall economy. For this purpose, we employ the system general methods of moments (GMM) approach on data from World Development Indicators from 2005 to 2019. Our findings divulge a detrimental impact of natural resource dependence on the growth of the non-natural resource sectors and the overall economy. We find empirical evidence confirming the validity of the Dutch disease and the pull effect mechanisms among SSA economies. We underscore the detrimental (favourable) effects of unemployment and external debt (institutional quality and foreign direct investment) on sectorial and overall economic growth. From this perspective, we recommend that resource-rich countries in SSA encourage innovation and diversification to reduce the dependence on natural resources whilst stimulating the growth of other sectors. Prudent financial management and the building of strong institutional structures are also encouraged to supplement the cessation of overexploitation of natural resources to stimulate economic growth.

Suggested Citation

  • Asiamah, Oliver & Agyei, Samuel Kwaku & Ahmed, Bossman & Agyei, Ellen Animah, 2022. "Natural resource dependence and the Dutch disease: Evidence from Sub-Saharan Africa," Resources Policy, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004858
    DOI: 10.1016/j.resourpol.2022.103042
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420722004858
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2022.103042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thorvaldur Gylfason & Gylfi Zoega, 2006. "Natural Resources and Economic Growth: The Role of Investment," The World Economy, Wiley Blackwell, vol. 29(8), pages 1091-1115, August.
    2. Basedau, Matthias, 2005. "Context Matters – Rethinking the Resource Curse in Sub-Saharan Africa," GIGA Working Papers 1, GIGA German Institute of Global and Area Studies.
    3. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    4. Gameli Adika, 2020. "Economic growth dynamics between resource‐rich and resource‐poor countries in sub‐Saharan Africa: The role of politics and institutions," African Development Review, African Development Bank, vol. 32(3), pages 303-315, September.
    5. Jean–paul Azam & Njuguna Ndung’u & Augustin Fosu, 2002. "Explaining Slow Growth in Africa," African Development Review, African Development Bank, vol. 14(2), pages 177-220.
    6. Barczikay, Tamás & Biedermann, Zsuzsánna & Szalai, László, 2020. "An investigation of a partial Dutch disease in Botswana," Resources Policy, Elsevier, vol. 67(C).
    7. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    8. Majumder, Monoj Kumar & Raghavan, Mala & Vespignani, Joaquin, 2020. "Oil curse, economic growth and trade openness," Energy Economics, Elsevier, vol. 91(C).
    9. Havranek, Tomas & Horvath, Roman & Zeynalov, Ayaz, 2016. "Natural Resources and Economic Growth: A Meta-Analysis," World Development, Elsevier, vol. 88(C), pages 134-151.
    10. Aryeetey, Ernest & Devarajan, Shantayanan & Kanbur, Ravi & Kasekende, Louis (ed.), 2012. "The Oxford Companion to the Economics of Africa," OUP Catalogue, Oxford University Press, number 9780199575978.
    11. Pegg, Scott, 2010. "Is there a Dutch disease in Botswana?," Resources Policy, Elsevier, vol. 35(1), pages 14-19, March.
    12. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 570-615, August.
    13. Rabah Arezki & Frederick van der Ploeg, 2011. "Do Natural Resources Depress Income Per Capita?," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 504-521, August.
    14. Apergis, Nicholas & Payne, James E., 2014. "The oil curse, institutional quality, and growth in MENA countries: Evidence from time-varying cointegration," Energy Economics, Elsevier, vol. 46(C), pages 1-9.
    15. Gylfason, Thorvaldur, 2001. "Natural resources, education, and economic development," European Economic Review, Elsevier, vol. 45(4-6), pages 847-859, May.
    16. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
    17. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    18. Tiba, Sofien, 2019. "Modeling the nexus between resources abundance and economic growth: An overview from the PSTR model," Resources Policy, Elsevier, vol. 64(C).
    19. Asiamah, Oliver & Agyei, Samuel Kwaku & Bossman, Ahmed & Agyei, Ellen Animah & Asucam, Joseph & Arku-Asare, Michael, 2022. "Natural resource dependence and institutional quality: Evidence from Sub-Saharan Africa," Resources Policy, Elsevier, vol. 79(C).
    20. Badeeb, Ramez Abubakr & Lean, Hooi Hooi & Clark, Jeremy, 2017. "The evolution of the natural resource curse thesis: A critical literature survey," Resources Policy, Elsevier, vol. 51(C), pages 123-134.
    21. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    22. Frederick van der Ploeg & Steven Poelhekke, 2009. "Volatility and the natural resource curse," Oxford Economic Papers, Oxford University Press, vol. 61(4), pages 727-760, October.
    23. Samuel Kwaku Agyei & Edward Marfo-Yiadom & Abraham Ansong & Anthony Adu Asare Idun, 2020. "Corporate Tax Avoidance Incentives of Banks in Ghana," Journal of African Business, Taylor & Francis Journals, vol. 21(4), pages 544-559, October.
    24. Smith, Brock, 2015. "The resource curse exorcised: Evidence from a panel of countries," Journal of Development Economics, Elsevier, vol. 116(C), pages 57-73.
    25. Apergis, Nicholas & El-Montasser, Ghassen & Sekyere, Emmanuel & Ajmi, Ahdi N. & Gupta, Rangan, 2014. "Dutch disease effect of oil rents on agriculture value added in Middle East and North African (MENA) countries," Energy Economics, Elsevier, vol. 45(C), pages 485-490.
    26. Aghion, Philippe & Bacchetta, Philippe & Rancière, Romain & Rogoff, Kenneth, 2009. "Exchange rate volatility and productivity growth: The role of financial development," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 494-513, May.
    27. Matthias Basedau, 2005. "Context Matters – Rethinking the Resource Curse in Sub-Saharan Africa," Economic History 0508002, University Library of Munich, Germany.
    28. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    29. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
    30. Atsushi Iimi, 2007. "Escaping from the Resource Curse: Evidence from Botswana and the Rest of the World," IMF Staff Papers, Palgrave Macmillan, vol. 54(4), pages 663-699, November.
    31. Atkinson, Giles & Hamilton, Kirk, 2003. "Savings, Growth and the Resource Curse Hypothesis," World Development, Elsevier, vol. 31(11), pages 1793-1807, November.
    32. Auty, Richard M. & Mikesell, Raymond F., 1999. "Sustainable Development in Mineral Economies," OUP Catalogue, Oxford University Press, number 9780198294870.
    33. Samuel Kwaku Agyei & Zangina Isshaq & Siaw Frimpong & Anokye Mohammed Adam & Ahmed Bossman & Oliver Asiamah, 2021. "COVID‐19 and food prices in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 33(S1), pages 102-113, April.
    34. Kim, Dong-Hyeon & Lin, Shu-Chin, 2017. "Human capital and natural resource dependence," Structural Change and Economic Dynamics, Elsevier, vol. 40(C), pages 92-102.
    35. Sang H. Lee & John Levendis & Luis Gutierrez, 2012. "Telecommunications and economic growth: an empirical analysis of sub-Saharan Africa," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 461-469, February.
    36. Thorvaldur Gylfason, 2006. "Natural Resources and Economic Growth: From Dependence to Diversification," Springer Books, in: Harry G. Broadman & Tiiu Paas & Paul J.J. Welfens (ed.), Economic Liberalization and Integration Policy, pages 201-231, Springer.
    37. Eregha, P.B. & Mesagan, Ekundayo Peter, 2016. "Oil resource abundance, institutions and growth: Evidence from oil producing African countries," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 603-619.
    38. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liang, Xuefang & Qianqian, Ding & Xiaozhou, Zhu & Ullah, Midrar, 2024. "Asymmetric relationship between natural resources extraction policy and financial development exist? A conflict and comparative analysis between China and US," Resources Policy, Elsevier, vol. 90(C).
    2. Chen, Yan & Murshed, Muntasir & Sinha, Avik & Alam, Mohammad Mahtab & Khudoykulov, Khurshid, 2024. "Revisiting the resource curse hypothesis from the viewpoint of green growth: The role of Fintech as the de-cursing agent," Resources Policy, Elsevier, vol. 95(C).
    3. Dzintra Atstāja & Kevin Wilclif Mukem, 2024. "Sustainable Supply Chain Management in the Oil and Gas Industry in Developing Countries as a Part of the Quadruple Helix Concept: A Systematic Literature Review," Sustainability, MDPI, vol. 16(5), pages 1-18, February.
    4. Oliver Asiamah & Samuel Kwaku Agyei, 2023. "Information sharing offices and economic growth in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 211-225, June.
    5. Huo, Qixin & Huang, Yuchen & Khan, Salahuddin & Mallek, Sabrine & Wolanin, Elżbieta, 2023. "Employment generation via natural resources: A novel perspective of Dutch disease in the employment market," Resources Policy, Elsevier, vol. 85(PB).
    6. Zhao, Xin & Shang, Yuping & Magazzino, Cosimo & Madaleno, Mara & Mallek, Sabrine, 2023. "Multi-step impacts of environmental regulations on green economic growth: Evidence in the lens of natural resource dependence," Resources Policy, Elsevier, vol. 85(PB).
    7. Wolde-Rufael, Yemane & Mulat-Weldemeskel, Eyob, 2023. "Is natural capital a blessing or a curse for capital accumulation in low income countries?," Resources Policy, Elsevier, vol. 85(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alssadek, Marwan & Benhin, James, 2023. "Natural resource curse: A literature survey and comparative assessment of regional groupings of oil-rich countries," Resources Policy, Elsevier, vol. 84(C).
    2. Badeeb, Ramez Abubakr & Lean, Hooi Hooi & Clark, Jeremy, 2017. "The evolution of the natural resource curse thesis: A critical literature survey," Resources Policy, Elsevier, vol. 51(C), pages 123-134.
    3. Asiamah, Oliver & Agyei, Samuel Kwaku & Bossman, Ahmed & Agyei, Ellen Animah & Asucam, Joseph & Arku-Asare, Michael, 2022. "Natural resource dependence and institutional quality: Evidence from Sub-Saharan Africa," Resources Policy, Elsevier, vol. 79(C).
    4. Ruba A. Aljarallah & Andrew Angus, 2020. "Dilemma of Natural Resource Abundance: A Case Study of Kuwait," SAGE Open, , vol. 10(1), pages 21582440198, January.
    5. Dauvin, Magali & Guerreiro, David, 2017. "The Paradox of Plenty: A Meta-Analysis," World Development, Elsevier, vol. 94(C), pages 212-231.
    6. Pérez, Claudia & Claveria, Oscar, 2020. "Natural resources and human development: Evidence from mineral-dependent African countries using exploratory graphical analysis," Resources Policy, Elsevier, vol. 65(C).
    7. Dauvin, Magali & Guerreiro, David, 2017. "The Paradox of Plenty: A Meta-Analysis," World Development, Elsevier, vol. 94(C), pages 212-231.
    8. Lotfalipour, Mohammad Reza & sargolzaie, Ali & Salehnia, Narges, 2022. "Natural resources: A curse on welfare?," Resources Policy, Elsevier, vol. 79(C).
    9. Sharma, Chandan & Paramati, Sudharshan Reddy, 2022. "Resource curse versus resource blessing: New evidence from resource capital data," Energy Economics, Elsevier, vol. 115(C).
    10. Yilanci, Veli & Aslan, Murat & Ozgur, Onder, 2021. "Disaggregated analysis of the curse of natural resources in most natural resource-abundant countries," Resources Policy, Elsevier, vol. 71(C).
    11. Ramez Abubakr Badeeb & Jeremy Clark & Abey P. Philip, 2021. "The Nonlinear Effects of Oil Rent Dependence on Malaysian Manufacturing: Implications from Structural Change using a Markov-Regime Switching Model," Working Papers in Economics 21/11, University of Canterbury, Department of Economics and Finance.
    12. Hilmawan, Rian & Clark, Jeremy, 2021. "Resource dependence and the causes of local economic growth: An empirical investigation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(03), January.
    13. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    14. Oliver Asiamah & Samuel Kwaku Agyei, 2023. "Information sharing offices and economic growth in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 211-225, June.
    15. Kpognon, Koffi D., 2022. "Effect of Natural Resources on the Size of Informal Economy in sub-Saharan Africa: An Empirical Investigation," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 1-14.
    16. Dwumfour, Richard Adjei & Ntow-Gyamfi, Matthew, 2018. "Natural resources, financial development and institutional quality in Africa: Is there a resource curse?," Resources Policy, Elsevier, vol. 59(C), pages 411-426.
    17. Bildirici, Melike E. & Gokmenoglu, Seyit M., 2020. "Precious metal abundance and economic growth: Evidence from top precious metal producer countries," Resources Policy, Elsevier, vol. 65(C).
    18. Tadadjeu, Sosson & Njangang, Henri & Asongu, Simplice A. & Kamguia, Brice, 2023. "Natural resources, child mortality and governance quality in African countries," Resources Policy, Elsevier, vol. 83(C).
    19. Laszlo Szalai, 2018. "Institutions and Resource-driven Development," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 4(1), pages 39-53, June.
    20. Ruba Abdullah Aljarallah, 2020. "The Economic Impacts of Natural Resource Dependency in Gulf Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 36-52.

    More about this item

    Keywords

    Natural resource curse; Economic growth; Sub-Saharan Africa; Non-natural resource sectors; Dutch disease; Pull effect;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N57 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Africa; Oceania
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:79:y:2022:i:c:s0301420722004858. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.