The Impact of Governance on Economic Growth in Africa

Sub-Sahara African countries have had a checkered past when it comes to good governance and institutions. Increasingly, economists and policy makers are recognizing the importance of governance and institutions for economic growth and development. The New Partnership for Africa’s Development (NEPAD) has four main goals: eradicating poverty, promoting sustainable growth and development, integrating Africa into the world’s economy, and accelerating the empowerment of women. Using fixed and random effects, and Arellano-Bond models, this paper investigates the role of governance in explaining the sub-optimal economic growth performance of African economies. Our results suggest that good governance or lack thereof, contributes to the differences in growth of African countries. Furthermore, our results indicate that the role of governance on economic growth depends on the level of income. In a nutshell, our results demonstrate that without the establishment and maintenance of good governance, achieving the goals of NEPAD will be hampered in Africa.