INSTITUTIONAL QUALITY VARIABLES AND ECONOMIC GROWTH IN SUBSAHARAN AFRICA: EVIDENCE FROM LOW-AND MIDDLE-INCOME COUNTRIES

Abstract

The world has made astounding progress in improving living standards during the last thirty-four years. Despite these remarkable progresses, the struggle against decline in the standard of living continues and, in some respects, it is becoming difficult to achieve, especially in Sub-Sahara Africa. SSA is made up of 48 countries and out of 25 low-income countries in the world 22 are in SSA, 20 SSA countries belong to the middle-income group. This means that out of 48 countries of SSA, 42 are among the low- and middle-income groups of the world. SSA has become home for low-income groups even with its abundant resources. In view of this, this study empirically investigated the impact of institutional quality variables on economic growth in low-middle income groups in SSA countries. The study used annual data from World Bank development indicators and World Governance Indicators from 2002 to 2022. Twenty-eight SSA countries were selected for the study. This study compares the effect of institutional quality variables on economic growth, in low- and middle-income SSA countries.  Panel unit root test was conducted using Levin, Lin and Chu (2002) method and all variables were integrated of order zero 1(0) with intercept. Hausman test result chose fixed effect method of estimation as the best fit for the regression. The results show that both low- and middle-income countries suffer weak institutional settings although in the middle-income groups, institutional quality is better than the low-income groups.

This is among the first studies to compare institutional quality variables and economic growth in SSA using evidence from low-middle income countries of SSA. The study therefore recommends that SSA countries should improve their institutional quality to embrace a higher standard of living.