Testing the Resource Curse Hypothesis: Evidence from Top Ten Resource-Rich Countries in Africa

This study reexamined the resource curse hypothesis within the context of top 10 resource rich countries in Africa during the period 2012-2019. The study applied the recently proposed generalized method of moments (GMM) procedure of Kripfganz (2019). The study revealed that natural resources have a negative and statistically significant impact on economic growth. Thus, a 5% increase in natural resources will decrease economic growth by 0.11% justifying the presence of the resource curse hypothesis. Similarly, financial development has been found to have impacted negatively on economic growth. A 1% increase in financial development decreases economic growth by 0.55%. However, the study evidenced a positive impact of institutional quality on economic growth. Furthermore, the results revealed that human capital has a positive and statistically significant impact on economic growth. This implies that a 1% increase in human capital and institution quality increases economic growth by 0.33% and 0.17%, respectively. Therefore, governments of the top 10 African resource-rich countries need to further invest in the growth-related sectors that would guarantee the benefits of the rents for a longer period. This can be achieved through further improvement in the design of sound and comprehensive economic policies capable of promoting economic growth and development. Similarly, there is need to overhaul not only their institutions but also sustain them so that corruption tendencies can be easily checked by all government officials in all related natural resource sectors with the aid of anti-corruption policies.