Resource Shocks, Corruption, and Local Business in Africa

89 Pages Posted: 27 Oct 2020

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Amanda Ross

University of Alabama - Culverhouse College of Commerce & Business Administration

Date Written: September 7, 2020

Abstract

The negative correlation between growth outcomes and natural resource abundance is well-known. Researchers have proposed a number of channels - such as corruption, education, and conflict - through which resource rents may negatively affect growth in a society. We utilize a more nuanced approach and focus on the heterogeneous effect of resource rents on firms across different firm sizes. Specifically, we combine firm-level World Enterprise Survey Data with resource data across Africa from Berman et al. (2017). We find small firms suffer across a range of categories - including corruption - in response to positive exogenous resource shocks. Large firms, however, tend to benefit from resource shocks and experience less corruption and crime. These results are robust to a number of alternative specifications as well as a placebo analysis where resource shocks are randomly assigned to areas where the mineral in question does not exist. Our findings contribute to the understanding of how resource rents exacerbate the existing difficulties faced by small firms in the developing world.

Keywords: Corruption, Natural Resource Curse, Conflict, Large Firms, Small Firms

JEL Classification: D73, D74, O13

Suggested Citation

Bologna Pavlik, Jamie and Ross, Amanda, Resource Shocks, Corruption, and Local Business in Africa (September 7, 2020). Available at SSRN: https://ssrn.com/abstract=3688541 or http://dx.doi.org/10.2139/ssrn.3688541

Jamie Bologna Pavlik (Contact Author)

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

Amanda Ross

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

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