Resource Dependence and Armed Violence: Impact on Sustainability in Developing Countries

The dependence on oil, gas, and mineral exports arguably has a negative impact on economic growth in resource-rich, developing countries. This article looks at the impact of resource dependence on adjusted net savings (ANS) as an indicator of weak sustainability. Our results, based on a panel of 104 developing countries during the recent commodity price boom, confirm a negative relationship between resource extraction and sustainable development as measured by ANS. We further look at the specific role of armed conflict and armed violence as captured by the homicide rate. Armed conflict, which is positively associated with resource dependence, negatively affects ANS per capita according to both our OLS and instrumental variables (IV) estimates. Similarly, armed violence has a detrimental effect on sustainable development. Our IV estimate suggests that a one-point increase in the homicide rate decreases ANS per capita by $60. Since education expenditures are a critical ANS component, we further examine the impact of resource dependence and violence on human capital. Consistent with previous findings, resource-dependent countries underinvest in education but armed conflict and violence do not affect the instantaneous share of education expenditures, hinting at a detrimental effect working through physical and social capital rather than education.