Download Overcoming the Resource Curse in Sub-Saharan

Overcoming the Resource
Curse in African States:
Examining the Effectiveness of the Developmental State Framework
on Economic Development in Resource-Rich African Countries
Jody-Ann Jones
Outline of Presentation
• Introduction
• Context
• Research Problem
▫ Botswana: An African Developmental State
• Research Question
• Research Argument
• Research Design
• Core Elements of the Developmental State (Leftwich)
• Core Elements of the Botswana Developmental State (Acemoglu, Johnson and Robinson)
• Operationalizing the Core Elements of the Developmental State
• Measurement Issues
• Model One’s Hypotheses
• Model Two’s Hypotheses
• Methodology
• Model One’s Findings
• Model Two’s Findings
• Implications of the Study
• Conclusion
Introduction: Resource Abundance in Africa
Source: U.S. Geological Survey, "2009 Minerals Yearbook: Africa," U.S. Department of the Interior (September 2011).
Context
• The Resource Curse thesis (Sachs and Warner, 1999;
Ross, 1999; Auty, 2001; Humphreys, Sachs and Stiglitz,
2007):
▫ The abundance in natural resources is inversely
correlated with economic development because of
several factors:
 Dutch Disease
 Vulnerability to Market Price Volatility
 Rent-Seeking
Research Problem
$8,000.00
$7,000.00
$6,000.00
$5,000.00
$4,000.00
GDP per capita
$3,000.00
$2,000.00
$1,000.00
$Mozambique
Sierra Leone
Democratic Republic of
Congo
Botswana
Botswana: A Developmental State
• What is a developmental state?
▫ Adrian Leftwich describes the developmental
state as “those states whose politics have
concentrated sufficient power, autonomy,
capacity and legitimacy at the center to shape,
pursue, and encourage the achievement of
explicit developmental objectives” (Leftwich,
2000).
Research Question
• To what extent does the developmental state
framework mitigate the resource curse, and
hence improve economic development in
resource-rich African states?
Research Argument
• I argue that it is not the abundance of natural
resources that causes low development, but rather it
is the absence of key aspects of the developmental
state model.
• Conversely, the presence of elements of the
developmental state model in resource-rich African
countries should be associated with higher levels of
economic development as illustrated in Botswana.
Research Design
• In order to assess the efficacy of the developmental
state framework, I empirically test the effects of the
operationalized concepts from the developmental
state literature on economic development (measured
by GDP per capita)
• In terms of African developmental states, two seminal
texts are Adrian Leftwich’s States of Development
and Acemoglu, Johnson and Robinson’s article “An
African Success Story: Botswana.”
Core Elements of
The Developmental State (Leftwich)
• Developmental Elite
• Relative State Autonomy
• Bureaucratic Power
• Weak Civil Society
• Strong Capacity in Managing State’s Economic Interests
• Weak Human Rights
• Legitimacy i.e. Widespread Support for the Regime in Power
Core Elements of the Botswana
Developmental State (Acemoglu et. al)
• Basic system of law and contract
• Limitation of state and private predation
• Relatively noncorrupt bureaucracy
• Government investment in infrastructure and public goods
• Prudent fiscal policy
• Strong private property institutions
Operationalizing the Core Elements of
“The Developmental State”
Model One (Leftwich)
Model Two (Acemoglu et. al)
Developmental Elite 
Transparency International’s Corruption Perceptions Index
Law and Contract 
African Development
Enforce a Contract
Relative State Autonomy  Polity IV’s Polity
Limitation of State Predation 
Polity IV’s Executive Constraint
Bureaucratic Power 
African Development Indicators’ Government Effectiveness
Relatively Noncorrupt Bureaucracy 
Transparency International’s Corruption
Index
Influence and Capacity to Manage Economic Interests 
World Bank’s Doing Business Index
Investment in Public Goods 
African Development Indicators’ Education Spending as a
percentage of Government Expenditure and Health
Spending as a percentage of Government Expenditure
Weak Human Rights 
African Development Indicators’ Participation and Human Rights
Prudent Fiscal Policy 
African Development Indicators’ Fiscal Balance
State Legitimacy  Polity IV’s Durable
Strong Private Property Institutions 
African Development Indicators’
Register Private Property
Indicators
'Time
Time
Required
to
Perceptions
Required
to
Measurement Issues
• In order to measure the strength of the civil society, I
use the GINI Index of Inequality. However, because
of the lack of sufficient data coverage for this
variable, it was omitted from the data analysis.
Methodology
• In order to test these hypotheses, I analyze two
time-series cross-sectional multiple regression
models for the period 1989-2011 based on data
collected from the World Bank’s African
Development Indicators, Doing Business Index,
Transparency International Corruption Perceptions
Index, and the Polity IV Project.
Model One’s Findings
Table 1: Model One's Coefficients
Unstandardized Coefficients
Model
(Constant)
1
B
594.63
Std. Error
3556.15
Standardized
Coefficients
Beta
t
Sig.
.17
.87
Resource
2252.21
Abundant Dummy
631.45
.35
3.57
.00
Corruption
Perceptions Index
(score)
1500.41
677.03
.45
2.22
.03
Revised Combined
Polity Score
14.08
111.80
.02
.13
.90
Government
Effectiveness
(estimate)
-1499.82
1205.42
-.28
-1.24
.22
Ease of doing
business index
(1=most businessfriendly regulations)
-19.46
13.23
-.26
-1.47
.15
Participation and
Human Rights
-63.41
45.65
-.30
-1.39
.17
Regime Durability
59.43
27.94
.21
2.13
.04
a. Dependent Variable: GDP per capita (current US$)
Model Two’s Findings
Table 2: Model Two’s Coefficients
Unstandardized Coefficients
Model
(Constant)
2
B
-62.27
Std. Error
1383.59
Standardized
Coefficients
Beta
t
Sig.
-.05
.96
Resource
958.08
Abundant Dummy
287.18
.23
3.34
.00
Time required to
enforce a contract
(days)
.80
-.03
-.50
.62
Executive Constraints -.85
4.81
-.01
-.18
.86
Corruption
Perceptions Index
(score)
148.98
.73
9.61
.00
Public spending on
education, total (% of
-70.35
government
expenditure)
34.87
-.15
-2.02
.05
Health expenditure,
public (% of
government
expenditure)
-127.36
45.82
-.21
-2.78
.01
Fiscal balance, cash
surplus/deficit
(current US$)
.00
.00
.12
1.84
.07
Time required to
register property
(days)
-4.72
1.93
-.19
-2.44
.02
-.41
1432.34
a. Dependent Variable: GDP per capita (current US$)
Implications of the Study
• In order to better understand the economic
dynamics of resource-rich African countries,
we need to look at three important
dimensions:
▫ Corruption
▫ Regime Legitimacy and Stability
▫ Private Property Institutions
Conclusion
• This study’s empirical evidence supports its research argument that not all
African countries encounter the resource curse. The resource curse thesis
states that countries which are highly endowed with natural resources
tend to experience lower economic growth and subsequently lower
economic development. However, the statistical results from the models
tell us that the resource-rich African countries that experience relatively
higher levels of development incorporate elements of the developmental
state framework to some extent.
• Botswana has utilized this framework to some degree and has had
remarkable economic success. Possibly, a solution to the resource curse in
other resource-rich African states is to adopt the key elements of the
developmental state framework based on this study’s findings: 1) decrease
the incidents of public sector corruption, 2) improve the legitimacy and
stability of their regimes, and 3) enhance their private property
institutions.