Linking natural resource dependence and industrialization in sub-Saharan African countries

ABSTRACT

Despite the growing literature on natural resources, little is known about the effect of natural resources on industrialization, particularly in sub-Saharan African countries. The aim of this paper is to fill this gap by assessing how natural ressources affect the industrialization process in 27 sub-Saharan African countries over the period 2000–2016. To carry out our investigation, we used several estimation methods including Ordinary Least Squares (OLS), Fixed Effect (FE) and Generalized Moments Methods (GMM). The results show that there is a negative relationship between natural resource dependence and industrialization. A U-shaped relationship between natural resource dependence and industrialization is established. Furthermore, the disaggregation of natural resource rents shows that while oil rent, gas rent and mineral rent hamper the industrialization process, the effect of forest rent and coal rent on the industrialization is positive. Finally, we show that governance plays an important role in mitigating the negative impact of natural resources on industrialization. Thus, governance can be an effective way to break the resource curse in sub-Saharan African countries.

KEYWORDS:

• Natural resources
• industrialization
• governance
• sub-Saharan African countries

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. We didn’t convert our data into logs for two reasons: first, the fact that certain variables are captured in rates and some of their observations are negative at a given period (for example: GDP and FDI) and second, for disaggregated natural resource rents, there are observations that have zero values for some countries at a given period (for example: CAR).