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Natural Resource Revenues and Public Investment in Resource‐rich Economies in Sub‐Saharan Africa
Author(s) -
Karimu Amin,
Adu George,
Marbuah George,
Mensah Justice Tei,
AmuakwaMensah Franklin
Publication year - 2017
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12313
Subject(s) - economic rent , economics , natural resource , resource (disambiguation) , public capital , resource curse , sovereign wealth fund , investment (military) , panel data , revenue , dutch disease , foreign direct investment , development economics , monetary economics , politics , market economy , fiscal policy , macroeconomics , finance , public investment , exchange rate , computer network , computer science , law , political science , ecology , econometrics , biology
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 1990–2013, 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.