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International Journal of Academic Research in Economics and Management Sciences

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ISSN: 2226-3624

Natural Resource Rents and Economic Growth Paradox, the Analysis of Resource Curse and Its Transmission Channels in West Africa: The Role of Public Expenditure Policy

Mamady Fofana

http://dx.doi.org/10.6007/IJAREMS/v11-i3/14573

Open access

The study analyses the natural resource curse through the component of public expenditure policy, namely productive and unproductive expenditures, as plausible channels transmitting the resource curse in West Africa. The study examines which channel is the most prominent transmitter among public expenditure, Dutch disease, rent-seeking, and political institutions. A dynamic panel was adopted for the 1998-2018 period using Feasible Generalised Least Squares (FGLS) and Dynamic Ordinary Least Squares (DOLS) estimation techniques. The results confirmed the resource curse hypothesis in West Africa via productive expenditure and rent-seeking behaviour as the only relevant transmission channels. Moreover, productive expenditure interacting with natural resource rents mitigates the resource curse and can reverse it under a certain threshold. On the other hand, unproductive expenditure through government consumption expenditure exacerbates the resource curse. The findings suggest that appropriate productive expenditure policy measures in terms of fixed capital formation, and a diligent fight against corruption can overturn the resource curse over time.

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In-Text Citation: (Fofana, 2022)
To Cite this Article: Fofana, M. (2022). Natural Resource Rents and Economic Growth Paradox, the Analysis of Resource Curse and Its Transmission Channels in West Africa: The Role of Public Expenditure Policy. International Journal of Academic Research Economics and Managment and Sciences, 11(3), 185–205.