Institutions and the resource curse: New insights from causal machine learning

Area of Science:

• Economics
• Political Science
• Development Studies

Background:

• The resource curse theory posits that natural resource wealth can hinder economic development and fuel conflict.
• Institutional quality is often cited as a key determinant of whether resource wealth is a blessing or a curse.

Purpose of the Study:

• To reassess the relationship between institutional quality and the economic and conflict-related effects of natural resource rents in Sub-Saharan Africa.
• To investigate the nuanced impacts of mining presence and global mineral price fluctuations on local development and conflict.

Main Methods:

• Utilized data from 3,800 Sub-Saharan African districts.
• Applied a causal forest estimator to analyze the causal relationships.

Main Results:

• Stronger institutions enhance the positive economic impact of mining activities and mitigate conflict.
• The influence of increased world mineral prices on economic development and conflict is non-linear and shows minimal dependence on institutional quality.

Conclusions:

• Institutional quality plays a critical role in mediating the effects of mining presence, but not global price shocks, on local outcomes.
• Findings support the nuanced view that resource rents' impact is contingent on institutional context, particularly for direct resource extraction activities.