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Heterogeneous role of resource dependence on industrialization in developing countries

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Abstract

This paper empirically investigates the role of natural resources on industrialization in a sample of 128 developing countries from 1990 to 2019. Results reveal three main facts. First, resource dependence (rents-to-GDP) impedes total and manufacturing value-added and employment, except for the construction industry. Second, resource dependence increases (lowers) total industrial value-added below (above) a threshold of 70% of GDP, whereas this threshold is 48% for manufacturing sector. Third, productive and redistributive institutions lessen these adverse effects. This study revealed that resource dependence confirms the crowding-out effects of natural resource, raising concerns about a long-term curse. Nonetheless, strong institutions may effectively foster economic growth and structural change by offering a framework of resource wealth management. Results of this study suggest that, with proper management system, it is possible to use rents from natural resources to finance industrialization in developing countries.

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Notes

  1. The authors would like to thank the editor and anonymous reviewers whose comments greatly improved this paper.

  2. See Toye and Toye (2003).

  3. Alternatively, one may use other threshold regression methods (e.g., Hansen (2000), Kremer et al. (2013)).

  4. Judicial independence, impartial courts, protection of property rights, military interference in rule of law and politics, integrity of the legal system, legal enforcement of contracts, regulatory restrictions on the sale of real property, and reliability of police.

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Authors and Affiliations

  1. Department of Public Economics, University of Yaounde II, Yaounde, Cameroon

    Paul Awoa Awoa

  2. Department of Analysis and Economic Policy, University of Yaounde II, Yaounde, Cameroon

    Henri Atangana Ondoa

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  1. Paul Awoa Awoa
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  2. Henri Atangana Ondoa
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PAA helped in methodology, software, data curation, investigation, writing—original and revised draft preparation, visualization, investigation, and supervision. HAO helped in methodology, software, data curation, investigation, writing—original and revised draft preparation, visualization, investigation, and supervision.

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Correspondence to Paul Awoa Awoa.

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Appendix

Appendix

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Table 7 Countries
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Table 8 Variable definition and descriptive statistic
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Awoa Awoa, P., Atangana Ondoa, H. Heterogeneous role of resource dependence on industrialization in developing countries. Comp Econ Stud (2024). https://doi.org/10.1057/s41294-023-00231-9

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