The heterogeneous effect of natural resource rents on vulnerable employment in sub-Saharan Africa: Does the quality of institutions matter?

Natural resources have been seen both a blessing and a curse. This paper investigates the effect of natural resources rents on vulnerable employment in sub-Saharan Africa and explores the role of institutional quality. The data used cover 30 countries over the period 2005-2018. The results from the data-driven finite mixture model estimation highlight three vulnerable employment regimes. In the first regime, natural resources rents increase vulnerable employment. In the second regime, natural resources rents do not affect vulnerable employment while they reduce vulnerable employment in the third regime. Thus, natural resources are curse in the first regime, neutral in the second and blessing in the third. The results also show that countries with lower political risk, especially better investment profile, less internal conflicts, and where law and order and rigorous and impartial public administration prevail, are more likely to belong to the resource blessing regime. These results underline the need for resource-rich countries to improve the quality of their institutions to benefit from the blessing of natural resources.