Natural resource dependence and economic growth in SSA: are there threshold effects?

Abstract

ABSTRACT The debate on the natural resource curse hypothesis has attracted the attention of policy makers and policy analysts for the past few decades. However, the empirical findings on such a hypothesis have proven inconclusive. Our study investigates the threshold effects of natural resource dependence on economic growth in sub-Sahara Africa (SSA) using both aggregate and disaggregate data from 1990 to 2019 by employing a threshold effect model. The results indicate a double threshold effect of natural resource rent on economic growth. In particular, below 6% of GDP, aggregate natural resource rent exerts a significant negative effect on economic growth. However, as the rents increase above 6% to about 15% of GDP its negative effect on economic growth significantly reduces. In addition, beyond 15% of GDP natural resource rent exhibit a substantial significant positive impact on economic growth. Further, the disaggregated data reveal that forest rents exhibit a strong weighty adverse effect on economic growth at all levels of thresholds. The study recommends that governments within the sub-region need to put in policies to ensure that natural resources generate at least 15% of GDP annually to promote growth.