Distributional Dynamics Amidst Resource Abundance: The Implications of Structural and Institutional Transformations

Abstract

A critical evaluation of prior studies indicates that the roles of structural and institutional transformations in moderating natural resource-inequality dynamics is understudied. Moreover, very little is known about such dynamics in resource-rich sub-Saharan African (SSA) countries. To cover the literature gaps, this study harnesses annual panel datasets comprising natural resource rent, structural transformation, institutional quality and technology for the top 10 resource-rich SSA countries over 2000–2018 for empirical evaluations. After ascertaining long-run coevolution among the series, the estimates of the panel quantile regression depict that natural resource abundance is the leading cause of income disparities in these countries; hence, it promotes inequality significantly across all quantiles of the distributions. Furthermore, at the 5th quantile, both structural and institutional transformations deaccelerate inequality insignificantly, but at the 10th quantile, institutional reforms engender equitable income distributions. Notably, beyond the 10th and 50th quantiles, institutional and structural reforms significantly promote income disparities. Additionally, at the 10th quantile, technology marginally promotes equitable income distributions, but at the 60th, 70th and 80th quantiles, technology significantly promotes inequality. Implicatively, a blend of structural reforms and technological improvements within the thresholds around 10th and 50th quantiles could ensure equitable prosperities in the region. Among other policy options highlighted herein, pro-equity redistributive policies that ensure no one is left behind are expedient to eliminate income disparities in these countries.

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