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Effect of Resource Rent on Infrastructural Development in Africa: Moderating Role of Governance Institutions

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  • Jonathan E. Ogbuabor
  • Ekene ThankGod Emeka
  • Anthony Orji

Abstract

This study investigates the effect of resource rent on infrastructural development in Africa and how governance institutions moderate this relationship. The pooled OLS and the dynamic system GMM estimation techniques are adopted with a panel of 52 African economies over the period 2005-2022. We find that resource rent significantly hampers infrastructural development in Africa, thereby reflecting the prevalence of the "natural resource curse" phenomenon. We also find that the unconditional effects of governance institutions are mainly negative and significant, which aptly reflects the presence of weak institutions in Africa. Interestingly, our results also show that low institutional quality in the region intensifies the adverse effect of resource rent, while a higher level of institutional quality in the region moderates the adverse effect of resource rent. These findings remain consistent with components of resource rent, such as forest rent, oil rent and coal rent. Consequently, we emphasize the policy implications of these findings, which mainly underscore the need for policymakers and leaders in Africa to embrace institutional reforms that will ensure transparent resource management, increased infrastructural investment and sustainable infrastructural development on the continent.

Suggested Citation

  • Jonathan E. Ogbuabor & Ekene ThankGod Emeka & Anthony Orji, 2025. "Effect of Resource Rent on Infrastructural Development in Africa: Moderating Role of Governance Institutions," Politická ekonomie, Prague University of Economics and Business, vol. 2025(1), pages 31-57.
    • Handle: RePEc:prg:jnlpol:v:2025:y:2025:i:1:id:1450:p:31-57
    DOI: 10.18267/j.polek.1450
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    References listed on IDEAS

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    1. Ragnar Torvik, 2009. "Why do some resource-abundant countries succeed while others do not?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(2), pages 241-256, Summer.
    2. Abdulahi, Mohamued Elyas & Shu, Yang & Khan, Muhammad Asif, 2019. "Resource rents, economic growth, and the role of institutional quality: A panel threshold analysis," Resources Policy, Elsevier, vol. 61(C), pages 293-303.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Resource rent; infrastructural development; governance institutions; system GMM; Africa;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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