Does dependence on natural resource rents reduce the quality of institutions in Africa?

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Résumé

This study analyzes the effect of dependence on natural resources on the quality
of institutions in Africa. Three composite indices (economic, institutional, and political
governance) and the World Bank's six governance indicators are used. Based on a sample of
26 African countries whose contribution of natural resources to GDP is at least 8% over the
period 2000-2020, we estimate a panel data model using the two-stage least squares method
(IV-2SLS). The results show that total rents from natural resources negatively affect the
overall institutional quality index, the economic, institutional, and political governance
indices, and the six governance indicators. These results remain robust when alternative
measures of institutional quality are used, such as the Polity2 democracy score, respect for
property rights, and the index of economic freedom. The results suggest the need for
improved governance of natural resources. In particular, to set up online platforms to report
corruption cases and ensure stronger guarantees for property rights and transparency in the
management of rents derived from natural resources.

Mots-clés

Natural resource rents Institutional quality IV-2SLS method Africa