RESOURCE DEPENDENCE, INSTITUTIONAL QUALITY, AND ECONOMIC GROWTH DYNAMICS: A SYSTEM GMM ANALYSIS FOR SUB-SAHARAN AFRICA

Abstract

This study investigates the dynamic relationship between natural resource dependence, institutional quality, and economic growth in Sub-Saharan Africa (SSA) over the period 1990–2023. Using a dynamic panel data model estimated through System Generalized Method of Moments (System GMM), the analysis addresses endogeneity concerns while capturing the temporal persistence of growth. Results reveal that higher natural resource dependence, measured through natural resource rents and export-based proxies, significantly hampers GDP per capita growth, which is consistent with the resource curse hypothesis. However, strong institutional quality mitigates this negative effect, with institutional improvements emerging as a key enabler of sustainable growth. Additionally, gross capital formation, trade openness, and labor force participation positively influence growth dynamics. Sensitivity analyses and robustness checks confirm the stability of the results across alternative specifications and subsamples. Policy implications emphasize the need for institutional reforms, economic diversification, and regional trade integration to unlock SSA’s growth potential. The findings contribute to a nuanced understanding of how governance and structural factors condition the developmental outcomes of resource-rich economies in Africa.