The Effects of Public Governance Quality and Corruption Control on Economic Growth - Evidence from Sub-Saharan Africa and MENA Countries

Abstract

Purpose - With growing interest in the relationship between national governance, corruption and economic growth, the purpose of this paper is to investigate the impact of corruption and macro-level governance on economic growth using advanced statistical estimation approach.

Design/methodology/approach - This paper uses a cross-country panel data for 40 Sub-Saharan Africa and Middle East and North Africa (MENA) countries over the period of 2003-2014 and applies various estimation approaches such as the system generalized method of moments (GMM) to control for endogeneity issues and unobserved heterogeneity.

Findings - The empirical results show that governance index has a significantly positive effect on economic growth. In contrast, corruption has a significantly negative effect on economic growth. Moreover, foreign direct investment and population appear to have positive impact on economic growth, while trade openness and education level revels deterrent effect on economic growth.

Originality - This study provides a comprehensive examination of the relationship between national governance, corruption and economic growth in the Sub-Saharan Africa and the MENA countries. The novelty of the paper is that it investigates for the first time, to the best of the authors’ knowledge, using advanced econometric method (GMM) to document unbiased findings.

Research limitations/implications - The tests disregard the impact of GFC, but the results could be different in the presence of exogenous shock. Future research may also examine the effects of governance and corruption on economic growth for pre-GFC and post-GFC periods.

Practical implications - These results have important policy implications for regulators and policy makers of emerging countries. These findings suggest that Sub-Saharan Africa and MENA countries need to improve their public governance quality and control corruption. To accelerate economic growth, they should also encourage foreign direct investment into the economic activities.

Social implications - Our study further calls for the implementation of anti-corruption campaign and the need for governance to restrain corruption. This will further enhance social responsibility, accountability, transparency, and public voice.

Keywords: Governance, Corruption, Economic Growth, Sub-Saharan Africa and MENA countries.

JEL Classification: G38, H41, O10