The Effect of Institutions, Social Spending and Human Capital on Economic Growth in Sub-Saharan Africa

Abstract

The sustainability of economic growth depends on its capacity to positively impact on the national income, human capital and development outcomes of a country’s inhabitants as a whole. For this reason, this study provides an integrated assessment on the role of institutions, social spending and human capital on economic growth in 43 Sub-Saharan African countries from 2005 – 2013 using dynamic panel GMM technique. Findings from this study reveal a positive and statistically significant relationship between institutions, social spending and human capital on economic growth. Though across the models, life expectancy is positive but without the effect of institutions it becomes insignificant. This implies that institutions play an important role in promoting human capital accumulation that supports economic growth. Thus, it has become eminent to improve the quality of institutions, social spending and human capital in order to achieve long-run economic growth in the region. This is not only due to the high statistical significance of the parameters estimated of the main dependent variables but as a result of their robustness to multiple model specification.

Keywords: Institutions, Social Spending, Human capital, Economic growth.