From “Dutch Disease” to Forests Degradation? The Nexus among Mineral Rent, Income Inequality, and Forest Conversion in Sub-Saharan Africa

The African continent is rich in natural resources, including minerals and fossil fuels. The economies of resource-rich countries in Africa exhibit a significant concentration in the production and export of goods derived from natural resources. However, the utilization of these resources brings with it numerous drawbacks that surpass the concept of the “natural resource curse,” such as forest conversion or deforestation. This study analyzes the impact of natural resource exploitation or mining, through mineral rents and income inequality, on forest conversion as a proxy for deforestation. The study uses a dataset from 30 resource-rich sub-Saharan African countries from 2000 to 2020, along with a dynamic specification approach and the two-step Generalized Method of Moments (GMM) technique to effectively reduce inherent biases. Our study results indicate a correlation between the acceleration of forest conversion and both mineral and forest rent. Africa shows significant income inequality, which exacerbates forest conversion. This inequality leads to an overdependence on forests and agricultural products, thus increasing pressure on forests. Additionally, the findings provide support for the hypothesis of an inverted U-shaped Economic Kuznet Curve for deforestation. Chinese foreign investment plays a significant role in reducing forest conversion. Given the detrimental effects of natural resource exploitation on forest cover, it is crucial to set aside a proportional share of revenues, such as area taxes, for compensation purposes.