Revisiting the effect of institutions on the economic performance of SSA countries: Do legal origins matter in the context of ethnic heterogeneity?

Abstract

Our knowledge about the role of legal institutions in the developing world is limited. The present paper fills this gap in the literature by estimating, in a production function framework, how legal origins interact with ethnic heterogeneity in determining GDP-per-capita in 35 Sub-Saharan African (SSA) countries over the period 1970–2013. The countries in our sample follow either the Common (British) law or the Civil (French) law system and exhibit a wide range of ethnic heterogeneity. Our findings show that in the context of low ethnic heterogeneity, Common law is associated with better economic outcomes. Nonetheless, in the presence of high ethnic heterogeneity, countries under Civil law experience higher levels of political stability and coordination resulting in a higher level of GDP-per-capita. In SSA countries, stability and coordination are also essential factors in the efficient use of natural resources, which are abundant in Africa, and can substantially contribute to prosperity.