Weak economic institutions in Africa: a destiny or design?

Abstract

Purpose The primacy of institutions for economic progress has been established in the literature. Yet, less research attention is paid to the existence and persistence of weak economic institutions in Africa. Thus, the purpose of this paper is to empirically explore the determinants of the quality of economic institutions in Africa. Design/methodology/approach Hausman–Taylor instrumental variable estimator of panel regression was employed for a sample of 43 Sub-Sahara African countries over the period 1995–2017. Findings The study finds that the existence and persistence of weak economic institutions in Africa is more of design than destiny. That is, weak economic institutions are created and sustained more by bad political institutions rather than cultural diversity and geographical factors. Therefore, strong political institutions need to be entrenched to reverse the equilibrium of weak economic institutions and dismal economic performance in the continent. Practical implications The study provides deep understanding of the determinants of economic institutions. This is imperative for policy makers, development agencies and stakeholders in designing viable economic policies and programs for the continent. Originality/value The novelty of the study is rooted in the examination of the factors responsible for the development and persistence of weak economic institutions in Africa. The idea is original because previous studies focus on political institutions and neglected economic institutions.