Household Welfare, Capital Flight, and Natural Wealth: Does Resource Distribution and Governance Matter in Five Resource-Rich, Capital Flight-Prone African Economies?

Despite enormous natural resources, several African countries continue to grapple with persistent capital flight and limited improvements in household welfare. This paradox raises fundamental concerns regarding the roles of governance and resource distribution on the continent. Accordingly, this paper explores the complex nexus between household welfare, capital flight, and natural resource income in five African economies that are both resource-rich and highly prone to capital flight. Furthermore, it assesses how resource distribution and its interplay with governance affects household well-being. Data spanning from 1980 to 2020 were employed and empirically analysed using the novel pooled Bewley estimator. The findings demonstrated that capital flight depletes resources that would otherwise accelerate economic development and enhance living standards in the long term. Likewise, inefficiencies in natural resource management constrains the fiscal capacity for government investment in social infrastructure, resulting in poor household welfare over time. Moreover, inequitable resource distribution diminishes household well-being in the long run, underscoring challenges in the allocation of income and social infrastructure. However, improved governance quality reduces household living costs and fosters better well-being outcomes. The paper also observes short-term welfare responses and proposes relevant policy measures to these challenges. JEL Classification: D63, I31, O11.