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<p>This study explores the moderating role of institutional indicators in the relationship between natural resource rent and the informal economy of African nations between 1990 and 2020. The study applies cross-sectional autoregressive lags, augmented mean group, and a two-step system generalized method of moment as the estimation techniques. The results show that total natural resource rents positively impact the informal economy, contributing to its growth in the region. On the other hand, institutional indicators- bureaucratic quality, corruption control, government stability, and democratic accountability- negatively impact the informal economy, thus lessening its size. However, law and order positively impact the growth of the informal economy in Africa. The net effect suggests that institutional indicators, particularly bureaucratic quality, corruption control, government stability, and democratic accountability, absorb the positive influence of total natural resources rent on the informal economy. Economic growth and trade openness negatively influence the informal economy, thus decreasing its size. These findings are robust to the other estimations. The study's conclusion reveals the importance of solid institutional architecture in curbing corruption, opportunistic behavior, and rent-seeking activities in the natural resources sector. Furthermore, natural resources wealth should be redirected to the economy's productive sector.</p>

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The criticality of institutions in the link between natural resources rents and informal economy: insight from a panel of African countries

  • 期刊论文

  • 发表日期：

    2025年5月6日

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  • James Temitope Dada,
  • Emmanuel Olayemi Awoleye,
  • Mosab I. Tabash,
  • Samrat Ray,
  • Mamdouh Abdulaziz Saleh Al-Faryan

摘要

This study explores the moderating role of institutional indicators in the relationship between natural resource rent and the informal economy of African nations between 1990 and 2020. The study applies cross-sectional autoregressive lags, augmented mean group, and a two-step system generalized method of moment as the estimation techniques. The results show that total natural resource rents positively impact the informal economy, contributing to its growth in the region. On the other hand, institutional indicators- bureaucratic quality, corruption control, government stability, and democratic accountability- negatively impact the informal economy, thus lessening its size. However, law and order positively impact the growth of the informal economy in Africa. The net effect suggests that institutional indicators, particularly bureaucratic quality, corruption control, government stability, and democratic accountability, absorb the positive influence of total natural resources rent on the informal economy. Economic growth and trade openness negatively influence the informal economy, thus decreasing its size. These findings are robust to the other estimations. The study's conclusion reveals the importance of solid institutional architecture in curbing corruption, opportunistic behavior, and rent-seeking activities in the natural resources sector. Furthermore, natural resources wealth should be redirected to the economy's productive sector.