How do extractive resources affect human development? Evidence from a panel data analysis

Abstract

This paper examines the effect of extractive resources on human development. We control for institutional quality through a composite index of institutional quality. Our sample covers 42 countries over the period 2009–2015. Given the small sample size, we use the bias-corrected least square dummy variable method. The results show that extractive resources have a positive and significant effect on human development. Health and education are the channels through which extractive resources affect human development. The quality of institutions improves the effect of extractive resources on health but destroys their positive effect on human development and education. This study reveals that the consideration of institutional quality must be specific to each sector (health and education) in a more in-depth analysis of the effect of extractive resources on human development.