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

Mehmet Balcilar, Berkan Tokar () and Godwin Olasehinde-Williams
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Berkan Tokar: Department of Economics, Eastern Mediterranean University

No 15-43, Working Papers from Eastern Mediterranean University, Department of Economics

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.

Keywords: CO2 emissions; Economic Growth, Official Development Assistance, Institutions, Sub-Saharan Africa, Panel GMM (search for similar items in EconPapers)
JEL-codes: F35 F50 O43 O55 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018
New Economics Papers: this item is included in nep-afr, nep-dev and nep-env
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http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-43.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Examining the interactive growth effect of development aid and institutional quality in Sub-Saharan Africa (2020)
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