Natural resource windfalls and economic growth nexus: a panel analysis for Africa

Abstract

We employed fixed effects model to study the influences of natural resource windfalls and some variables on African economic development. For each growth model, equations were estimated for the full panel, and for the samples with good and bad institutional structures. The outcomes show that resource curse exists in Africa and can be explained by Africa's lack of good institutional structures. Hence, an implication of the results is that good institutions promote economic growth but bad institutions destroy an economy. Therefore, we first recommend the need to improve institutional quality in Africa. Second, the challenge of attaining rapid and sustainable growth and development requires Africans to strengthen and re-enforce anti-corruption laws that could discourage the further spread of corruption. Third, policymakers should ensure short-and-long term opportunities of diversifying the economy by engaging in agriculture, transportation, and services.