EFFECTS OF INSTITUTIONS ON ECONOMIC GROWTH IN AFRICA

Abstract

The study examined the effects of institutions on economic growth in Africa by adopting 
the growth accounting equation as the core framework for the per capita GDP growth 
models that were estimated. These models comprised 7 equations, with the 7 forms of the 
World Governance Indicators (WGI) being made to feature one at a time in the 7 
equations. The models were first estimated with the Random Effects estimation 
techniques and appropriate diagnostic tests were carried out and remedial econometric 
steps were taken by estimating the models with PCSE when the tests signalled the 
existence of problems, to ensure the validity of the estimates. Following the above 
methodology, the highlights of findings confirmed the relevance of those newly 
introduced factors and the continued relevance of a number of the existing factors as 
determinants of economic growth. Based on the findings, the study recommended that 
policymakers who have a quest to promote economic growth should focus on factors (i.e., 
voice and accountability, regulatory quality, rule of law, combined governance indicator, 
external conflict, religious tension, capital stock growth, financial depth, foreign direct 
investment, literacy rate, socioeconomic condition, and investment profile) that were 
found to have effects on economic growth.