Institutional quality and resource-based economic sustainability: the mediation effects of resource governance

Abstract

The discovery of extractive resources is associated with multiple opportunities and unbridled optimism on achieving socio-economic development for many countries. However, the question how the host governments meet expectations of indigenous people by ensuring an ideal resource-based economic sustainability (RES) has been receiving less research attention. Using the global panel dataset of 80 resource-endowed economies from 2010 to 2017, we postulate and empirically examine the mediating effect of the resource governance (RESOGV) on the relationship between institutional quality (IQ) and RES. The ANOVA and post hoc ANOVA results revealed significant disparities in terms of IQ, RESOGV, and RES among countries with different levels of economic development, regions, and sector (mining or petroleum). Moreover, the fixed effects (FE) and ordinary least square (OLS) results confirmed that IQ marginally influenced RES. However, the influence was more pronounced when it was partially (but complementarily) mediated by the RESOGV. The paper, therefore, stresses the importance of host governments in improving the quality of their institutions. This will ultimately help enhancing their RESOGV capabilities for attaining economic, social and environmental sustainability.