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Governance and economic growth in Africa: evidence from linear, nonlinear and dynamic panel analysis

Author

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  • Giannis Karagiannis

    (University of Macedonia)

  • Suzanna-Maria Paleologou

    (Aristotle University of Thessaloniki)

Abstract

In this paper, we study the impact (if any) of governance quality on economic growth in Africa, using a panel dataset of fifty countries during the period 2008–2017. For this purpose, we use the Ibrahim Index of African Governance (IIAG), which consists of four component indicators related to the (i) safety and rule of law, (ii) participation rights and inclusion, (iii) sustainable economic opportunity and (iv) human development. Instead of simply using its original formulation, which is based on equal weights, we also construct weighted average variants of the IIAG using four distance-based methods and Shannon entropy for such purpose. We then use these variants of the IIAG, including the equal weights formulation, to estimate alternative specifications of an econometric model relating governance quality and economic growth, conditional on several control variables, using fixed effects, linear and nonlinear and dynamic GMM. The results from the linear and dynamic GMM show that, regardless of the aggregation weights used for the IIAG, governance seems to have a significant positive impact on economic growth. On the other hand, in the fixed effects model, we find evidence for a non-monotonic relation, taking a U-shaped (convex) form indicating that countries may benefit from misgovernance.

Suggested Citation

  • Giannis Karagiannis & Suzanna-Maria Paleologou, 2025. "Governance and economic growth in Africa: evidence from linear, nonlinear and dynamic panel analysis," Empirical Economics, Springer, vol. 69(1), pages 39-75, July.
    • Handle: RePEc:spr:empeco:v:69:y:2025:i:1:d:10.1007_s00181-025-02726-z
    DOI: 10.1007/s00181-025-02726-z
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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