Influence of Governance Components on Economic Growth in Tanzania

Abstract

The link between institutions and economic performance is well established, but there is no single infrastructure blueprint that works for all countries. As a result, identifying the most critical infrastructures required to stimulate economic growth is difficult. The purpose of this research is to identify the governance institutions or components that improve Tanzania's economic performance. Data from 1996 to 2021 were gathered from a variety of sources, including the Ministry of Finance, the Central Bank of Tanzania, and the World Bank. For data analysis, multiple regression models were used, and an error correction model based on modern economic growth theory was used. The variables were stationary in their first difference, according to the Augmented Dickey-Fuller (ADF) tests. The findings show that the rule of law and corruption control increases economic growth by 24.7% and 47.21% significantly unlike the political instabilities which had no significant impact on economic growth. Furthermore, the study finds that voice and accountability, as well as government effectiveness and regulatory quality, have a negative impact on Tanzanian economic growth by 26%, 14.7%, and 21.5% respectively. To sustain economic growth, policymakers should focus on strengthening rule of law institutions, ensuring an effective, efficient, and independent judiciary system, adequately controlling corruption and restructuring the political system to have a significant impact on economic growth.