Resource Curse or Blessing? Examining the Interplay of Political Instability, Natural Resources, and Economic Development in Sub-Saharan Africa

ABSTRACT This article analyzes the impact of institutional quality and mineral rents on foreign direct investment (FDI) and economic growth in 22 Sub-Saharan African (SSA) countries using panel data from 1990 to 2020. The study employs panel unit root, cointegration, and a bias-correction method for dynamic panel data analysis. The bias-correction method for dynamic panel data tackles endogeneity and omitted variable bias, leading to more accurate estimates of the causal links between political instability, mineral rents, institutional quality, FDI, and economic growth, which is vital given the fluctuating institutional quality in complex SSA economies. Findings indicate that political instability paradoxically boosts FDI but harms economic growth. Mineral rents similarly attract FDI while hindering growth, confirming the resource curse in SSA. The study emphasizes that improving institutional quality and resolving political instability are crucial for these countries to escape the resource curse and achieve sustainable development. Effective institutions are paramount for SSA nations to convert mineral wealth into widespread economic progress, this study argues. Transparency, efficiency, the rule of law, and robust institutions can mitigate the detrimental effects of mineral rents on growth. Policy reforms should prioritize strengthening legal frameworks, actively combating corruption, and empowering civil society in natural resource governance.