Are productive capacities cursed? Evidence on the income from natural resources for African economies

Abstract Over the past few decades, numerous studies have emerged on questions of natural resources. Despite this abundant literature and the importance of productive capacities for sustainable development, there is almost no study on the effect of natural resources on productive capacity. In order to fill this gap, this study analyzes the effects of natural resources on the productive capacities of African countries. Using data from 42 African countries over the period 2000–2018, we show that natural resources have on average a negative effect on the productive capacities of African countries. By distinguishing between different natural resources, we see that the effect is more amplified on diffuse resources. Our results also show that there is a U-shaped relationship between natural resources and productive capacities. Nevertheless, we note that the threshold from which natural resources improve productive capacities is included in the interval [33.90–43.85]. We therefore recommend that the leaders of African countries establish institutional mechanisms to ensure effective management of revenues drawn from natural resources and allocated to productive capacities. This involves strengthening the institutional sphere that guarantees political stability. JEL classification: O40, O55, O43.