Gross Capital Formation, Institutions and Poverty in Sub-Saharan Africa

Abstract

The conventional wisdom is that rapid economic growth is driven by investment. Paying particular attention to the state of gross fixed capital formation (gfcf), poverty and institutions in sub-Saharan Africa, this paper investigates the effect of gfcf on poverty and explores whether the gfcf and poverty relationship can be strengthened by institutions. Using the panel data-set of 41 sub-Saharan African countries over the period 1981–2010 and dynamic two-step system generalised method of moment estimator, it is found that gfcf reduces poverty and institutions reinforce the gfcf and poverty link.