Economic Complexity and Good Governance in Sub-Saharan Africa: A Cross Country Analysis

Abstract

The underlying problems of Sub-Saharan African development are a result of a crisis in governance. Over the years, issues of governance and economic development have been the focus of debate in academia. However, the existing literature has not adequately explored the association between good governance and economic complexity. The purpose of this study is therefore to investigate the short-run and long-run relationships between economic complexity and good governance in 27 Sub-Saharan African countries for the period 1996–2019 using the PMG-ARDL model. The findings reveal that economic complexity, foreign aid, and the Gini coefficient have a positive and statistically significant long-run impact on good governance in Sub-Saharan Africa. Thus, the null hypothesis that economic complexity has a significantly positive impact on good governance is accepted by these findings. The short-run dynamics results reveal that economic complexity and foreign aid have a negative and insignificant impact on good governance, while foreign direct investment, the Gini coefficient, and unemployment have a positive and insignificant impact on good governance in Sub-Saharan Africa. Based on the findings, it is recommended that policymakers in the region place more emphasis on structural transformations to transform their productive structures, which will ultimately lead to higher economic growth in Sub-Saharan Africa. Policies geared towards the diversification of exports (i.e., economic complexity) in the region for economic growth and development are also recommended.