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Natural Resource Revenues and Public Investment in Resource-rich Economies in Sub-Saharan Africa

Journal article
Authors Amin Karimu
George Adu
George Marbuah
Justice Tei Mensah
Franklin Amuakwa-Mensah
Published in Review of Development Economics
Volume 21
Pages e107-e130
ISSN 13636669
Publication year 2017
Published at
Pages e107-e130
Language en
Links https://doi.org/10.1111/rode.12313
Subject categories Economics

Abstract

© 2017 John Wiley & Sons Ltd. The general policy prescription for resource-rich countries is that, for sustainable consumption, a greater percentage of the windfall from resource rents should be channeled into accumulating foreign assets such as a sovereign public fund as done in Norway and other developed but resource-rich countries. This might not be a correct policy prescription for resource-rich sub-Saharan African (SSA) countries, where public capital is very low to support the needed economic growth. In such countries, rents from resources serve as an opportunity to scale-up the needed public capital. Using a panel data for the period 1990–2013, we find in line with the scaling-up hypothesis that resource rents significantly increases public investment in SSA and that this tends to depend on the quality of political institutions. Moreover, we also find evidence of a positive effect of public investment on economic growth, which also depends on the level of resource rents.

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