Governance, institutional quality and economic complexity in selected African countries

Litha Mini (), Clement Moyo () and Andrew Phiri ()
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Litha Mini: Nelson Mandela University
Andrew Phiri: Nelson Mandela University

International Journal of Economic Policy Studies, 2025, vol. 19, issue 1, No 7, 159-181

Abstract: Abstract New economic thinking speculates that the diversification and sophistication of economic capabilities/structures is key in explaining why African countries lag in development behind the rest of the world. We question the extent to which non-traditional growth factors such as governance and institutional quality are related to economic complexity for 35 African countries. We estimate panel GMM regressions using 8 different measures of governance/institutional quality for both linear and kinked regressions using annual data collected between 1996 and 2021. The baseline estimates reveal a positive linear relationship between most measures of governance and institutional quality and economic complexity. Our sensitivity analysis further show that institutions/governance have stronger relationship with economic complexity in the post-global financial crisis era. Moreover, nonlinear or kinked relationships emerge once the data is segregated into different income and resource abundant groups. Altogether, our findings of a nonlinear relationship between institutions/governance and economic complexity are novel to the literature and offer unique insights on how African policymakers can use governance/institutions for improving the complexity of production processes.

Keywords: Governance; Institutional quality; Economic complexity; Nonlinearities; Africa (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42495-024-00145-z

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