THE DEVELOPMENT EFFECTS OF NATURAL RESOURCES: A GEOGRAPHICAL DIMENSION

Abstract

Despite the recent growth resurgence, Sub-Saharan Africa (SSA) remains the poorest region in the world. At the same time, it is a region that heavily relies on natural resources. In this paper we investigate the extent to which the second fact helps explain the first one. The distinctive feature of our study is that we take a geographical perspective and allow the effect of natural resources to differ across regions of the world. Our findings suggest that (i) the effect of natural resource intensity on per-capita income is positive and significant in general, but almost negligible and possibly negative in SSA, (ii) natural resources have a negative effect on institutional quality in SSA only, (iii) natural resources hinder human capital accumulation in SSA much more than anywhere else, and (iv) the combination of bad disease environments and large resource endowments accounts for most of the observed cross-regional differences in the effect of natural resources.