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Illicit Natural Resource Trade and Security: Does Gold customs fraud Expand or Undermine Military Spending in Africa?

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  • Banao, Fawzi

Abstract

In resource-rich African countries, the illicit trafficking of mineral resources poses a growing threat to state stability and governance. Therefore the paper investigates the effect of gold customs fraud on military spending, using a panel dataset of 50 African countries from 2000 to 2019. Employing an instrumental variable strategy, we find that higher levels of gold customs fraud are significantly associated with lower military expenditures. These findings suggest that illicit resource flows erode governments' tax mobilization and undermine their ability to respond to defense needs. The results are robust across multiple econometric specifications, including system GMM, and Jackknife estimation.

Suggested Citation

  • Banao, Fawzi, 2025. "Illicit Natural Resource Trade and Security: Does Gold customs fraud Expand or Undermine Military Spending in Africa?," EconStor Preprints 315363, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:315363
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    File URL: https://www.econstor.eu/bitstream/10419/315363/1/MILITARIZATION-AND-BORDER-SECURITY.pdf
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    References listed on IDEAS

    as
    1. Fawzi Banao & Bertrand Laporte, 2022. "Terrorism, Customs and fraudulent Gold exports in Africa," CERDI Working papers hal-03889094, HAL.
    2. Julide Yildirim & Selami Sezgin & Nadir Ocal, 2005. "Military Expenditure And Economic Growth In Middle Eastern Countries: A Dynamic Panel Data Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(4), pages 283-295.
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    5. Cyril Chalendard & Gaël Raballand & Antsa Rakotoarisoa, 2019. "The use of detailed statistical data in customs reforms: The case of Madagascar," Development Policy Review, Overseas Development Institute, vol. 37(4), pages 546-563, July.
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    7. Ian Bannon & Paul Collier, 2003. "Natural Resources and Violent Conflict : Options and Actions," World Bank Publications - Books, The World Bank Group, number 15047, April.
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    11. Kpognon, Koffi D., 2022. "Effect of Natural Resources on the Size of Informal Economy in sub-Saharan Africa: An Empirical Investigation," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 1-14.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Military spending; Gold customs fraud; Illicit natural resource trade;
    All these keywords.

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