Institutions and Economic Growth in Sub Saharan Africa: Dynamic Panel Data Analysis
No Thumbnail Available
Date
2018-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Addis Ababa University
Abstract
This study investigates the role of institutions in economic growth in Sub-Saharan Africa to identify the most important institutions for economic growth. The study takes into account the product of different institutional measures to analyze the interaction effect of institutions on economic growth. The study uses the panel data of 16 countries of Sub-Saharan Africa for the period from 2002 to 2016 and the system-generalized method of moment (SGMM) that captures the problem of endogneity, autocorrelation, and heteroskedasticity problems. The empirical results from system GMM indicated that per capita GDP is autoregressive. The previous period per capita GDP influences the current level. In addition, investment has positive effect on real per capita GDP. Among institutional measures, government effectiveness, control of corruption, political stability and absence of violence, voice and accountability, legal system and protecting property rights, political rights and civil liberties have positive and significant effect on real per capita GDP. However, access to sound money has negative and significant effect on real per capita GDP. The effects of the interaction term of institutional variables are positive on real per capita GDP and the effects of interaction term of institutions with policy variables are positive and significant. Therefore, the empirical evidence shows that undertakings of a series of actions that improve institutional qualities promote economic growth in Sub Saharan Africa. The study confirms that the combined improvement of institutional qualities is indispensable. The improvement of qualities of institution along with government expenditure growth makes the effect of institutions more effective on real per capita GDP.
Description
A Thesis Submitted to
The Department of Economics
Presented in Partial Fulfilment of the Requirements for Degree of Master of Science in Economics (International Economics)
Keywords
Economic growth, Institutions, Sub-Sahara African