Explaining the Growth of Sub-Saharan Africa: The Role of Institutions

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Date

2007-08

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A.A.U

Abstract

Sub-Saharan Africa has been growing at very low rates in the past few decades. The roles of Malfunctioning institutions, geographic misfortune and lack of integration in explaining this have been a subject of much debate. This study assesses the role of institutions in explaining the slow Growth of Africa. In addition, it explores one of the possible transmission channels, aggregate Technical inefficiency, through which institutions affect economic growth. In order to evaluate the impact of institutions on economic growth, the neoclassical growth models (Solow and its Augmented version) have been estimated using differenced and systems GMM using data from 35 selected SSA countries from 1996-2005. Rule of law, government effectiveness, regulatory quality, political instability and voice and accountability are found to influence growth of SSA. However, control over corruption has no relation with growth in the continent. Using stochastic frontier analysis, this study found that only three aspects of governance- regulatory quality, government effectiveness and control of corruption-matter in influencing technical efficiency. Political aspects of governance-voice and accountability and political instability-have no relation with technical efficiency. Therefore, Sub-Saharan Africa's poor economic performance (slow growth and aggregate technical inefficiency) can in part be attributed to bad governance

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Keywords

Growth, Technical Inefficiency, Institutions/Governance, GMM, Stochastic frontier analysis

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