An Assessment of the Nexus between Good Governance and Economic Growth in Sub-Saharan Africa

Abstract

Abstract Subject and purpose of work This study investigates the nexus between good governance and GDP per capita within Sub-Saharan African countries (SSA), using a dynamic panel data set from 2005 to 2023. The study contributes a comprehensive investigation to the literature that links the previous and recent effects of good governance indicators on economic growth in Sub-Saharan African countries. Drawing on data from the World Development Indicators (WDI), World Governance Indicators (WGI), and the International Monetary Fund (IMF), the study examines 36 SSA countries through key governance indicators, including government effectiveness (GEF), government corruption control (GCC), political stability and absence of violence (PSA), regulatory quality (RQ), and rule of law (RL). Materials and methods A two-step system Generalized Method of Moments (sys-GMM) estimator is employed to address endogeneity concerns, particularly the association between the lagged dependent variable and potential exogenous variables, as well as to control for biases, unobserved panel heterogeneity, and measurement errors. Results Empirical findings indicate that: establishing government effectiveness structures yields a significant positive impact on GDP per capita, enhancing government corruption control mechanisms contributes substantially to GDP per capita by mitigating resource misallocation, and improvements in regulatory quality and adherence to rule of law are positively associated with GDP per capita. Conclusions The study concludes that Sub-Saharan African countries should prioritize the development and enforcement of robust governance institutions to foster sustainable economic growth. By embedding good governance principles, Sub-Sahara Africa can strengthen its economic trajectory, ensuring the advancement of GDP per capita throughout the region.