Governance, Capital Flight and Industrialisation in Africa

The study examines the role of governance in modulating the effect of capital flight on industrialisation in Africa. The empirical evidence is based on Generalised Method of Moments and governance is bundled by principal component analysis, namely: (i) political governance from political stability and “voice and accountability”; (ii) economic governance from government effectiveness and regulation quality; and (iii) institutional governance from corruption-control and the rule of law. First, governance increases industrialisation whereas capital flight has the opposite effect; and second, governance does not significantly mitigate the negative effect of capital flight on industrialisation. Policy implications are discussed.

Keywords: Econometric modelling; Capital flight; Governance; Industrialisation; Africa

JEL Classification: C50; F34; G38; O14; O55

Suggested Citation: Suggested Citation

Asongu, Simplice and Odhiambo, Nicholas, Governance, Capital Flight and Industrialisation in Africa (October 25, 2019). Forthcoming: Journal of Economic Structures , EXCAS Working Paper, WP/19/077, Available at SSRN: https://ssrn.com/abstract=3475377 or http://dx.doi.org/10.2139/ssrn.3475377