Resource dependence and life expectancy in sub-Saharan Africa: Does financial sector stability break the curse?

Abstract

Natural resource wealth can contribute to human and economic development if the revenues from natural resource sectors are effectively invested by the government. In particular, countries with abundant natural resources have the potential to experience significant development and improvements in their quality of life. This study first examines the impact of natural resource rents on life expectancy in sub-Saharan Africa. We then investigate the moderating role of the financial sector in this relationship. Using mainly the Generalized Moments Method in a panel of 44 Sub-Saharan African countries over the period 1990–2021, the results obtained in this paper reveal a negative effect of natural resource rents on life expectancy, supporting the resource curse-health hypothesis. However, the stability of the financial system moderates this relationship and makes it positive, at specific thresholds. These results are consistent with Hirschman's conjecture that production leakage is low in landlocked countries, but that there are stronger links with public revenues than with other sectors of activity. The ‘wealth channel’ lubricated by the financial sector that this study identifies calls for greater caution when adopting non-rentier policies in countries exploiting their natural wealth, specifically countries with low human capital. We suggest that a portion of resources should be allocated to financing human capital in order to increase life expectancy.