Institutional Quality and Economic Growth: Evidence From Sub-saharan Africa Countries
Year: 2025
Type: article
Abstract: Institutions are widely recognized as important determinants of economic growth. A well- functioning institutional environment provides a conducive environment for economic actors to operate, invest and innovate, leading to sustained economic growth. In Sub-Saharan Africa (SSA), institutional quality has been identified as a critical factor in driving economic growth. However, the impact of institutional quality on economic growth in SSA remains a subject of debate in the literature. While some studies have found a positive relationship between institutional quality and economic growth, others have found weak or no relationship. This study investigates the role of institutions on economic growth in Sub-Saharan Africa to identify the most important institutions for economic growth. This paper employs two step systems GMM to analyse the effect of institutional quality on economic growth for Sub-Saharan African countries for the period from 2005 to 2020. The findings show that an improvement in institutional quality positively and significantly improve Sub-Saharan African countries economic growth. The findings further provide evidence that the effect of institutional quality on output varies with population size and the income level of SSA countries. In particular, institutional qualities are more effective in driving income growth in less populated countries than average and highly populated countries. In addition, the findings indicate that the impact of institutional quality on output growth varies with income level of SSA countries. An improvement in institutional quality is more likely to improve economic performance of upper middle income SSA economies than the middle and low income SSA countries. 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 growth.
DOI: 10.20372/nadre:19321
Author: BEKALU DEMELASH
Language: English
Subfield: Information Systems
Field: Computer Science
Domain: Physical Sciences
Open Access status: green
OpenAlex ID: W7084599539
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