The role of institutions in economic development

Abstract

Purpose – The purpose of this paper is to explore the alleged link between institutional quality and economic performance in 27 Sub‐Saharan Africa (SSA) countries during the period 1984‐2003.Design/methodology/approach – Four institutions' quality indicators, namely government stability, corruption, ethnic tensions and socioeconomic conditions, along with other control and policy variables, are employed in a panel data analysis.Findings – The institutional variables assume a key role in the process of economic development whereas the control variables display a limited effect. Thus, the “conventional variables” of economic theory may not be able to fully explain the SSA experience.Research limitations/implications – Future research efforts should explore how the vast changes experienced by the countries in that region influenced their economic evolution during the last decades.Practical implications – Policy makers should primarily focus on improving institutional quality, which is likely to positively af...