THE IMPACT OF ILLICIT FINANCIAL FLOWS ON SOCIAL WELFARE IN SUB-SAHARAN AFRICA

Abstract

In studies concerning Illicit Financial Flows, one issue of relative importance is the role it plays in depleting social welfare standards in developing countries. The aim of the paper is to empirically investigate the impact of illicit financial flows on social welfare in Africa using a sample of 41 African countries over the period 2008 to 2017. Using data from Global Financial Integrity (GFI) and the World Development Indicator (WDI) and employing the General Method of Moment (GMM), we find out that illicit financial flows reduce welfare in Africa when captured by the Human Development Index as well as access to basic necessities like water, electricity and education. Results equally show some dynamism depending on the political regime (autocracy or democracy) practiced in the country. From our results, efforts in curbing illicit financial have to be emphasized in order for African countries to attain the welfare levels enjoyed by other developed countries.