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Do economic growth and institutional quality reduce poverty and inequality in West Africa?

Hugues Kouadio and Lewis Gakpa ()

Journal of Policy Modeling, 2022, vol. 44, issue 1, 41-63

Abstract: Over the past two decades, the West African region has experienced much faster economic growth than other parts of the world. However, despite this economic upturn, the region has continued to experience high levels of inequality and poverty, yet economic growth is considered to be one of the main drivers of poverty reduction. An interesting literature indicates that local conditions may limit the expected effects of economic growth on poverty and income inequality. In this study, we are interested in the role of institutional factors that have been largely ignored in explaining poverty reduction and inequality outcomes in this region. Thus, this study empirically examines the role of economic growth and institutional quality on inequality and poverty reduction in West Africa. Using data from the World Development Indicators (WDI), the International Country Risk Guide (ICRG) and the Standardized World Income Inequality Database (SWIID), our results show that economic growth remains a necessary condition for poverty reduction and that the overall improvement in the quality of institutions contributes significantly to reducing poverty and income inequality in the long term. This contribution is made in particular through the improvement of democratic institutions, the alleviation of bureaucratic constraints, the quality of the judicial and regulatory system, the control of corruption and the quality of government stability. Furthermore, we show that improvements in the judicial system, low levels of corruption and better bureaucratic quality happen to be prerequisites for economic growth to significantly reduce income inequality. These results therefore call on policy makers in the West African region to improve their institutional framework and especially these dimensions with a view to enabling the region citizens to improve their living conditions.

Keywords: Economic growth; Institutions quality; Income inequality; Poverty (search for similar items in EconPapers)
JEL-codes: D3 I3 O1 O43 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jpolmod.2021.09.010

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