Natural Resources, Institutional Quality and Sustainable Development: Simultaneous Analysis of the Main Transmission Channels

Baghdedi S and Kamel EW

Published on: 2026-01-04

Abstract

The sustainable development of resource-rich countries reveals a counter-intuitive phenomenon: their natural wealth is a blessing for some and often turns into a curse for others. The objective of this paper is to show that the curse of natural resources has been elucidated through political economy; resource revenues have devastating effects on political and economic modes of governance. Via rent-seeking behaviors by political elites, natural rent has often generated extreme cases of institutional collapse.

The study includes 70 countries and data that characterize them, over a period from 1980 to 2021, and via a simultaneous equation model, we seek to study the trilateral relationship and the interaction links between natural resources, institutional quality and sustainable development.

The empirical results show that most of the countries with natural wealth are classified as countries with low human development levels, with a HDI between 0.207 and 0.314, these countries are finally victims of the curse of natural resources, a curse particularly due to a worsening of the institutions in force. However, the developed countries, despite the precariousness of their natural resources, they have exploited this endowment in the strengthening of their economies, while recording good indicators of human and social development, this has been achieved through a great transparency and better management of natural resources, hence a good institutional quality that acts positively on the rents generated by resources.