INSTITUTIONAL QUALITY AND ECONOMIC GROWTH: EVIDENCE FROM SUB-SAHARAN AFRICA COUNTRIES

Institutions are widely recognized as important determinants of economic growth. A well-<br> functioning institutional environment provides a conducive environment for economic actors to<br> operate, invest and innovate, leading to sustained economic growth. In Sub-Saharan Africa (SSA),<br> institutional quality has been identified as a critical factor in driving economic growth. However,<br> the impact of institutional quality on economic growth in SSA remains a subject of debate in the<br> literature. While some studies have found a positive relationship between institutional quality and<br> economic growth, others have found weak or no relationship. This study investigates the role of<br> institutions on economic growth in Sub-Saharan Africa to identify the most important institutions<br> for economic growth. This paper employs two step systems GMM to analyse the effect of<br> institutional quality on economic growth for Sub-Saharan African countries for the period from<br> 2005 to 2020. The findings show that an improvement in institutional quality positively and<br> significantly improve Sub-Saharan African countries economic growth. The findings further<br> provide evidence that the effect of institutional quality on output varies with population size and<br> the income level of SSA countries. In particular, institutional qualities are more effective in driving<br> income growth in less populated countries than average and highly populated countries. In<br> addition, the findings indicate that the impact of institutional quality on output growth varies with<br> income level of SSA countries. An improvement in institutional quality is more likely to improve<br> economic performance of upper middle income SSA economies than the middle and low income<br> SSA countries. Therefore, the empirical evidence shows that undertakings of a series of actions<br> that improve institutional qualities promote economic growth in Sub Saharan Africa. The study<br> confirms that the combined improvement of institutional qualities is indispensable. The<br> improvement of qualities of institution along with government expenditure growth makes the effect<br> of institutions more effective on real per capita GDP growth.