Do globalization and resource rents matter for human well-being? Evidence from African countries

Abstract

Many African countries are endowed with huge natural resources but still lag behind as far as human development is concerned. This study examines the link between globalization, natural resource rents and human development in 49 African countries over the 2000–2017 period. We use the two-step Generalized Method of Moments (GMM) estimations to analyse data coming from UNDP, the World Bank, and the KOF globalization index dataset. Our findings show that globalization improves human well-being. When further decomposition is done, we find that economic, social and political globalizations are positively and significantly associated with human development index. We also find evidence of a natural resources-human development curse. Moreover, our results show that the magnitude of the improving effect of globalization on human development depends on the natural resource rents with threshold of 9.15 (%GDP) at which the positive effect of globalization becomes negative. Finally, we perform sub-regional analyses and find that these patterns are shown to be robust across Sub-Saharan African countries. The main lessons learnt from the study are that African countries should care about how to seize opportunities offered by globalization and avoid rent-seeking behaviours when endowed with natural resource rents.