Governance Matters More than Development Constraints for Growth in Sub-Saharan African Countries

Abstract

The purpose of this study is to identify a series of development constraints for Sub-Saharan African (SSA) countries and to revisit the importance of governance quality that offsets the negative impacts of development constraints on economic growth in SSA. Over the last decade, SSA countries have gained momentum through significant economic growth. Some countries in the region, however, still struggle to upgrade their industrial structures and suffer from unfavorable initial conditions and external shocks. This study sheds light on the development challenges, especially faced by SSA, and draws implications regarding the role of good governance. This study revisits the importance of the governance factor for economic growth in SSA. By systematically reviewing the literature to categorize development constraints into two groups, we identify variables or conditions are either exogenously or endogenously determined. Employing the Hausman-Taylor models and the Fixed Effects method, we found that SSA countries with better governance perform better in terms of economic growth, regardless of unfavorable development conditions. The results show that, regardless of various development constraints, governance quality remains critical to growth in SSA. Thus, for SSA countries to effectively overcome their development constraints, an effort to improve governance is highly recommended.

Keywords: Governance, SDG goal 16, Development constraints, Sub-Saharan Africa, Economic growth

JEL Classification: O43; O55; O19; Q01