Short-term effects of national-level natural resource rents on life expectancy: A cross-country panel data analysis

Abstract

While a substantial amount of literature addresses the relationship between natural resources and economic growth, relatively little is known regarding the relationship between natural resource endowment and health at the population level. We construct a 5-year cross-country panel to assess the impact of natural resource rents on changes in life expectancy at birth as a proxy indicator for population health during the period 1970-2015. To estimate the causal effects of interest, we use global commodity prices as instrumental variables for natural resource rent incomes in two-stage-least squares regressions. Controlling for country and year fixed effects, we show that each standard deviation increase in resource rents results in life expectancy increase of 6.72% (CI: 2.01%, 11.44%). This corresponds to approximately one additional year of life expectancy gained over five years. We find a larger positive effect of rents on life expectancy in sub-Saharan Africa (SSA) compared to other world regions. We do not find short-term effects of rents on economic growth, but show that increases in resource rents result in sizeable increases in government revenues in the short run, which likely translate into increased spending across government sectors. This suggests that natural resources can help governments finance health and other development-oriented programs needed to improve population health.

Fig 1. Relationship between energy index and resource rents.

Data source: World Development Indicators (WDI) and The World Bank Commodity Price Data (The Pink sheet).

Fig 2. Relationship between predicted rents and change in life expectancy in five-year intervals.

Data source: World Development Indicators (WDI).