Research

Work in progress

"The Institutional Curse of Critical Minerals", with Chahir Zaki

Abstract: 

The global shift from traditional energy sources to clean and renewable energy initiative has exponentially increased the demand of critical minerals, which raises important questions about their developmental effects for rich mineral countries. This paper investigates whether critical minerals export improves economic growth and whether institutional quality moderates this relationship.

Utilizing critical mineral trade data from BACI – CEPII combined with macroeconomic and institutional quality indicators from the World Development Indicators (WDI) over the period1995-2023, the study estimates augmented growth framework using High Dimensional Fixed Effect (HDFE). The analysis further adopts Local Projections Impulse Response Functions (IRFs) to investigate the dynamic effects of critical minerals export shocks across institutional regimes. The study also differentiates concentrated and unconcentrated minerals, processed and unprocessed minerals, and digital-energy transition and neither digital nor energy minerals in both value and quantity categories.

The outcomes reveal that critical minerals dependence does not automatically translate to growth. Concentrated minerals and unprocessed minerals exports show a weaker long run growth performance, in line with resource curse literature. At the same time, the interaction results indicate that institutional quality substantially moderates these negative effects, recommending that strong governance can transform minerals resource wealth to more stable developmental outcomes. The Local Projection (IRFs) further shows that the bad institutional regimes encounter more volatile and less growth responses following minerals trade shocks. Overall, the results support the presence of an institutional curse of critical minerals.