Do Political Institutions Have Similar Effect on Quality of Economic Institution Across Different Sub-regions in Sub-Saharan Africa?

Abstract

This paper investigated the impact of four different indicators of political institutions on the quality of economic institutions across the different Sub-regions (Central, East, South and West Africa) in Sub-Sahara Africa (SSA). A panel data of 43 countries in SSA over the period 1996 to 2020 was gathered and analyzed. Im-Pesaran-Smith (IPS) panel unit root test technique is used to evaluate the stationarity property of the variables. Then, three alternative long-run panel cointegration regression techniques, namely; mean group (MG), pooled mean group (PMG) and dynamic fixed effects (DFE) are used to gauge the specified model. The most efficient among them is chosen using Hausman specification test. The findings from the empirical analysis are in three folds: i. political institutions do not have short-run impact on economic institutions in SSA as a whole and across the four sub-regions; ii. political institutions do have long-run influence on the quality of economic institutions, with rule of law having the biggest impact, follow by government effectiveness, political stability and quality of democracy in that order; iii. The impact of political institutions on economic institutions is not similar across the four sub-regions in SSA. Unlike previous studies, this paper identifies specific type of political institutions relevant in improving the quality of economic institution in each sub-region of SSA. The finding establishes inter alia that one size fit not all hypothesis is applicable across the sub-regions in SSA.