Natural resources: A curse on education spending?

Abstract

In line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments, this paper aims to address an important blind spot in our understanding of the "resource curse" by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices. Using a large panel dataset of 140 countries covering the period from 1995 to 2009, we find an adverse effect of resource dependence on public education expenditures relative to GDP that is robust to controlling for a range of additional covariates. Furthermore, our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point-source natural resources. These results are of particular importance for the sustainable management of natural resource wealth in developing countries, as they could achieve especially high returns by investing resource revenues in public goods such as education. While this paper underlines the importance of institutions and government accountability, our findings also raise questions on the role of the private sector as a partner in development, as the extractives industry could consider increasing funding for education through Corporate Social Responsibility (CSR) initiatives.

Curse or Blessing? An Empirical Re‐examination of Natural Resource‐Growth Nexus

“…Third, one strand of the literature suggests that abundant natural resources hinder education and human capital accumulation. (see, Behbudi et al, 2010;Cockx & Francken, 2016;Gylfason, 2001;Gylfason & Zoega, 2006).…”

“…Higher price or revenue volatility means more uncertainty and difficulties in economic decision making and planning process, implying an inefficient allocation of resources. Third, one strand of the literature suggests that abundant natural resources hinder education and human capital accumulation. (see, Behbudi et al, ; Cockx & Francken, ; Gylfason, ; Gylfason & Zoega, ).…”

Natural‐resource dependence and life expectancy: A nonlinear relationship

“…However, “health provision relative to the size of the economy declines with greater hydrocarbon resource‐intensity; the magnitude of this effect is less severe in non‐democratic countries” (p. 29). In a similar vein, Cockx and Francken (, ) extend the natural resource–curse phenomena on social spending for developed and developing countries. The authors find that greater natural‐resource abundance and dependence negatively affect government spending on health and education.…”

“…Stijns () finds that natural‐resource wealth is positively correlated with human capital measures. On the other hand, Cockx and Francken (), using data for more than 140 countries, find that natural‐resource dependence has a significant negative effect on education spending. Therefore, in Column 6, we added average years of total schooling from Barro–Lee dataset.…”

Institutions and Resource-driven Development

“…Windfalls provide a false sense of security and lower the excess returns on skilled labour which generate less incentive to invest in education. Significant theoretical and empirical evidences support that secondary enrolment rates and educational expenses are generally lower in resource-rich countries (Cockx & Francken, 2016;Gylfason, 2001a;Shao & Yang, 2014;Wadho, 2014). Moreover, the crowding-out of human capital is more pronounced in the absence of the positive feedback from learningby-doing.…”