Investment and inclusive growth in sub-Saharan Africa

Opeoluwa Adeniyi Adeosun, Philip Akani Olomola, Mosab I. Tabash and Suhaib Anagreh

African Journal of Economic and Management Studies, 2022, vol. 13, issue 4, 525-550

Abstract: Purpose - This paper examined the inclusive growth position of sub-Saharan Africa (SSA) through the metrics of poverty-gap, bottom20 and employment. Through these indicators, the study investigated the effects of domestic-investment on inclusive-growth and established the moderating impact of governance in the domestic investment-inclusive growth nexus. It further accounted for potential nonlinearity and investigated the governance threshold that moderates domestic investment-inclusive growth relationships. Design/methodology/approach - Using a sample of 41-SSA countries, the paper employed the fixed effect (FE) with the Driscoll and Kraay nonparametric consistent covariance matrix estimator, the generalized method of moments (GMM) and the dynamic-panel threshold techniques. Findings - The poverty-gap metric showed that with increasing GDP-growth, the income of the poor falls below the poverty-line, suggesting that GDP-growth episodes may have widened the poverty-gap and contributed minimally to reducing it. Findings revealed insignificant effects of GDP-growth on the bottom-20 metric while the employment-metric indicated that the “jobless-growth” phenomenon remained valid. The authors essentially established that economic growth has not been inclusive but the complementary roles played by domestic-investments and governance are essential requirements for achieving inclusive growth. The threshold-modeling indicated that countries in the upper-regime of governance gained more in reducing poverty gaps, increasing income shared by the bottom-quintile and improving employment for every percentage increase in investment. The authors confirmed nonlinearity and showed that there exists a governance threshold that respective governments in Africa must reach for domestic-investment to enhance inclusive growth. Originality/value - The paper accounted for cross-sectional dependence, nonlinearity and the governance threshold needed for domestic-investment to stimulate inclusive growth.

Keywords: Investment; Poverty-gap; Bottom20; Employment; Governance; Cross-sectional-dependence; Threshold (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-11-2021-0504

DOI: 10.1108/AJEMS-11-2021-0504

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