Synergistic and Threshold Role of Institutional Quality in the Sensitivity of Citizens’ Happiness to Natural Resource Rents in Resource-Rich African Countries

Abstract

This study examines how institutional quality (INST) affects the contribution of natural resource endowments (NREs) to citizens’ happiness and life satisfaction. It also identifies the INST threshold above which NREs enhance citizens’ life satisfaction and happiness. Consistent with challenges of low happiness levels, weak institutions, and the pervasive resource curse in Africa’s resource-rich economies, we analyse a dataset of these economies from 2012 to 2022. This study employs a robust standard-error Driscoll–Kraay nonparametric covariance matrix, dynamic common correlated effects, fully modified least squares, the method-of-moments quantile regression, and a dynamic panel threshold estimator. The findings suggest that natural resource endowment is a curse that lowers life satisfaction. Meanwhile, threshold analysis indicates that most resource-rich African countries fall short of the institutional development required to transform this curse into a blessing by encouraging the efficient allocation of resource earnings to initiatives that increase people’s happiness. Most of Africa’s resource-rich economies operate below this threshold. This study concludes that in Africa’s resource-rich countries, institutions are vital to incentivise the effective distribution of the proceeds from these resources to initiatives that enhance citizens’ happiness.