The Impact of Institutions on Economic Growth in Sub-Saharan Africa: Evidence from a Panel Data Approach

This study sheds light on the effect of institutional variables on economic growth in sub-Saharan African countries. It empirically analyzes the impact of institutional quality proxied by control for corruption, government effectiveness, and protection of the property right index among others on economic growth in sub-Saharan African countries during the sample period 1996–2012. The sample consisted of 21 sub-Saharan African countries. The methodology is based on first-differenced GMM estimator proposed by Arellano and Bond (Rev Econ Stud 58(2):277–297, 1991) for dynamic panel data, which is robust for taking care of individual fixed effects, heteroskedasticity, and auto-correlation in the presence of endogenous covariates. The results of this study indicate that improving institutional quality, specifically protecting property rights on average had a positive contribution to growth in output per capita in the sampled countries though its effect was small. However, institutional variables such as control for corruption and government effectiveness had a positive effect on growth though they were statistically insignificant. These findings agree with some of the studies conducted so far on the effect of institutions on growth.