Socioeconomic Performance in Sub-Saharan Africa with Reference to Southeast Asia: Natural Resources or Institutions?

Abstract

This paper explores the relationship between institutional quality, dependence on natural resources, and socioeconomic performance in Sub-Saharan Africa (SSA) and Southeast Asia (SEA) in the period from 1995 to 2015. It uses three measures―per capita GDP growth; foreign direct investment inflows (FDI); and infant mortality rate―to capture socioeconomic performance. The World Bank’s Regulatory Quality (RQ) indicator and the share of natural resource exports in percentage of total merchandise exports are used to capture institutional quality and resource dependence, respectively. Using Pooled OLS with robust estimators that control for temporal and spatial dependence, the paper finds that (1) higher levels of natural resource exports in SSA were significantly associated with larger FDI flows, but had no significant correlation with per capita GDP growth and infant mortality rate. Additionally, (2) in both SSA and SEA, a higher RQ score was significantly associated with increased per capita GDP growth and decreased infant mortality. The paper concludes by highlighting a few key areas that need serious consideration for further research on institutions and development in SSA.