Natural resource curse and its causation channels in Africa

Abstract

Natural resources are a source of economic growth in most countries. It has however been hypothesised that resource rich countries develop at a slower pace because of natural resource curse. This aim of study was therefore to test whether natural resource curse does exists in resource-rich African economies, and if present, determine whether it is caused by Dutch disease or institutional failure. The study used data from 47 African countries and analysis was done using linear regressions to assess the contribution of natural resources in economic growth and in determining the presence of natural resource curse. Seemingly unrelated regressions were used in explaining the role of institutions in resource curse. The study found that natural resource curse does exist especially in countries which rely heavily on primary products and mineral resources. Further, Dutch disease only explains part of resource curse but most is explained by institutional failure.