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Examining the Interactive Growth Effect of Development Aid and Institutional Quality in Sub-Saharan Africa

Author

Listed:
  • Mehmet Balcilar

    () (Department of Economics, Eastern Mediterranean University)

  • Berkan Tokar

    () (Department of Economics, Eastern Mediterranean University)

  • Godwin Olasehinde-Williams

    (Department of Economics, Eastern Mediterranean University)

Abstract

This study analyses the interconnectivity of growth, aid and institutions in Sub-Saharan Africa. The study employs annual data on a panel of 39 countries for the period 1996-2017. The hypothesis that the growth impact of aid and institutions could be interactive was examined. The hypothesis was tested using panel data for official development assistance, aggregate and individual measures of institutional quality, and economic growth, while controlling for sub-regional differences in Southern Africa, Eastern Africa, Western Africa and Central Africa. The results indicate the following: Aid has a direct positive, and an indirect negative growth impact through its interaction with domestic institutions. The synergistic growth impact of aid and institutions is substitutive rather than complementary. The substitutive effect is most pronounced in Western Africa, followed by Eastern Africa, and then Southern Africa but lowest in Central Africa. Good quality institutions are positively correlated with growth, and the institutions that reduce rent-seeking and protect property rights are the types of institutions with the biggest growth effects.

Suggested Citation

  • Mehmet Balcilar & Berkan Tokar & Godwin Olasehinde-Williams, 2018. "Examining the Interactive Growth Effect of Development Aid and Institutional Quality in Sub-Saharan Africa," Working Papers 15-43, Eastern Mediterranean University, Department of Economics.
  • Handle: RePEc:emu:wpaper:15-43.pdf
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    File URL: http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-43.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    CO2 emissions; Economic Growth; Official Development Assistance; Institutions; Sub-Saharan Africa; Panel GMM;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • 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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