Are We on the Path Toward a New Paradigm of Development in Some Leading African Countries? An Empirical Trial for Healing From Dutch Disease and Challenging the Resource Curse

ABSTRACT Empirical studies examining the resource curse in developing countries have failed to contradict this core theory, deeply rooted in the debate on natural resources. This paper innovates by challenging the Dutch disease literature. Indeed, we examine the relationship between natural resources, economic complexity (EC), institutions environment, and industrialization with data spanning the period 2000–2019 for 17 leading African countries. Backed by empirical analysis with OLS for baseline estimations, robustness with additional control variables for attrition bias issues, 4‐years average data that eliminates short‐run fluctuations, quantile analysis for differentiated countries heterogeneous threshold effects, 2SLS instrumental variables and two‐step system Generalized Method of Moments that resolve endogeneity concerns, we show that natural resources can enhance industrialization. We demonstrate that moving to higher levels of natural resources rents, EC that captures the amount of knowledge and know‐how embodied in the products each country produces, and higher level of institutional quality considered as the backbone of the economy, also leads to a better level of industrialization. More so, by testing interaction effects between natural resources and EC associated with NRs and quality of institutions index, the impact of NRs on industrialization is positive and statistically significant unlike the well‐known Dutch disease theory.