Institutions in the development of Sub-Saharan African countries in 2004–2019

Abstract

Motivation: Institutions play a significant role in development processes, contributing to understanding the economic backwardness of Sub-Saharan Africa. There is no consensus in the literature on the specific set of institutions that significantly influence developmental processes. Furthermore, there is no convincing evidence that institutions create the proper environment for long-term growth or result from increased development due to advances in human capital and investments. Therefore, the article examines overcoming the developmental backwardness of those countries following sustainable development.Aim: The article aims to analyze whether institutions contribute to the development processes of Sub-Saharan African countries. The paper identifies the differences in channels of institutions’ impact on the two development measures, GDP per capita and the Human Development Index (HDI). Regarding the high diversity in the level of development of countries in the region and the differences in their institutional systems, thirty-two countries in Sub-Saharan Africa were grouped regarding HDI level.Results: The heterogeneous panel Autoregressive Distributed Lags (ARDL) models revealed that in the lower developed countries, financial aid in the form of grants or very low-interest loans from the World Bank and OECD is of particular importance. They show that increased use of CO2 is a proxy for driving forces of African economies (production, investments, etc.). Indicators referring to institutions’ measurement like government effectiveness, political stability, economic freedom, or the number of days for establishing a business play important roles in continuing development.