Natural Resource Revenues and Public Investment in Resource-rich Economies in Sub-Saharan Africa

Abstract

The general policy prescription for resource-rich countries is that, for sustainable consumption, a greater percentage of the windfall from resource rents should be channeled into accumulating foreign assets such as a sovereign public fund as done in Norway and other developed but resource-rich countries. This might not be a correct policy prescription for resource-rich sub-Saharan African (SSA) countries, where public capital is very low to support the needed economic growth. In such countries, rents from resources serve as an opportunity to scale-up the needed public capital. Using a panel data for the period 19902013, we find in line with the scaling-up hypothesis that resource rents significantly increases public investment in SSA and that this tends to depend on the quality of political institutions. Moreover, we also find evidence of a positive effect of public investment on economic growth, which also depends on the level of resource rents.

Published in

Review of Development Economics
2017, Volume: 2017, number: 4, pages: 107-130

SLU Authors

• Marbuah, George

  • Department of Economics, Swedish University of Agricultural Sciences
    

• Tei Mensah, Justice

  • Department of Economics, Swedish University of Agricultural Sciences
    

• Amuakwa Mensah, Franklin

  • Department of Economics, Swedish University of Agricultural Sciences
    

Sustainable Development Goals

SDG12 Responsible consumption and production


UKÄ Subject classification

Economics


Publication identifier

DOI: https://doi.org/10.1111/rode.12313

Permanent link to this page (URI)

https://res.slu.se/id/publ/81345