The manufacturing output effects of infrastructure development, liberalization and governance: evidence from Sub-Saharan Africa

Abstract

The study draws inference on the effects of infrastructure development, liberalization, and governance on manufacturing production (MVA) in Sub-Saharan Africa. In order to determine the longrun implications of these factors, and for purposes of retaining estimates efficiency and consistency in the presence of complex errors, we employed the Panel-Corrected-Standard-Error estimator on panel data spanning 2003–2018 for 30 SSA countries. The main result of this in-depth analysis shows that infrastructure development as well as governance are key to manufacturing production. While infrastructure development affects MVA positively in the longrun, an improvement in the financial openness facilitates this linkage but only between transport infrastructure on the one hand, and electricity infrastructure on the other, whereas the converse appears the case when trade liberalization is the moderating variable. Overall, regardless of the type of liberalization, manufacturing output is always higher with better institutional quality. Our findings hold after controlling to additional covariates and are robust to alternative estimation measures. Among the other important policy derivatives of our findings, we emphasize that efforts aimed at reversing Africa’s pervasive infrastructure deficit, in ways that enhance manufacturing share in GDP, must be carefully nuanced under the avoidance of the incautious liberalization policies. We render support to the regional efforts to improve infrastructure, substantially curb poor governance while vigorously promoting the rule of law, regulatory quality, government effectiveness, voice and accountability.Supplementary InformationThe online version contains supplementary material available at 10.1007/s40812-022-00216-2.