Abstract
M.Com. (Economics)
This study investigates the effects of governance on both economic growth and human development. In particular, it investigates the effects of various dimensions of governance, namely, political stability and absence of violence, government effectiveness, rule of law, regulatory quality, control of corruption and voice and accountability on economic growth in Sub-Saharan Africa (SSA) and also investigates the effects of these aspects of governance on human development in SSA. Over the last two decades, researchers have investigated the relationship between governance and development. Aid to developing countries, especially in a region such as SSA, has been premised on showing improvement in governance. However, the seemingly well-understood notion of governance is exceedingly ambiguous and inconsistent, and the empirical relationship between governance and development is being disputed and challenged. The inability of growth indicators to explain variation in political, institutional, and social dimensions of the development process motivates this analysis of governance on economic growth as well as a measure of broader development: the Human Development Index (HDI). Furthermore, in an effort to determine if various dimensions of governance have different effects on social aspects of development, the study disaggregates the HDI into its components of life expectancy at birth and education. This study examines countries in SSA based on a cross-section of averaged data over the period 1999-2008 and annual panel data over the period 1996-2008, including pooled ordinary least square (OLS), fixed effects and system general method of moments (GMM) techniques. In the economic growth analysis using the system GMM estimation, we find that none of the different individual dimensions of governance or the overall governance indicator has a statistically significant impact on growth of GDP per capita of SSA countries. This finding is robust when regional effects and changes in the estimation methodology are included. In the human development analysis using the system GMM estimation, we find strong evidence to suggest that different individual dimensions of governance and the averaged governance indicators are a fundamental factor in explaining the development level of SSA countries. It appears that for the period of 1996-2008, all individual different dimensions of governance are positively and significantly related to HDI. When we disaggregate HDI into its separate non-income components, life expectancy at birth and education, we find sufficient evidence to indicate that different individual dimensions of governance and the averaged governance indicators do have effects on specified social indicators. This finding is robust when regional effects and changes in the estimation methodology are included.