Institutional quality, government expenditure and economic growth- panel evidence from four selected west african countries

Project Abstract

This study investigates the relationship between institutional quality, government expenditure, and economic growth in four selected West African countries using panel data analysis. The selected countries include Nigeria, Ghana, Senegal, and Cote d'Ivoire. The research aims to provide empirical evidence on how institutional quality and government expenditure impact economic growth in these countries. The study employs panel data for the period 2000-2018, combining data on institutional quality, government expenditure, and economic growth from various sources including the World Bank and the International Monetary Fund. The analysis utilizes panel econometric techniques to account for country-specific effects and potential endogeneity issues. The findings suggest that institutional quality plays a significant role in determining economic growth in the selected West African countries. Countries with stronger institutions tend to experience higher levels of economic growth compared to those with weaker institutional frameworks. This highlights the importance of good governance, rule of law, and control of corruption in fostering economic development. Moreover, the study reveals a positive relationship between government expenditure and economic growth, indicating that increased government spending can stimulate economic activity in these countries. However, the effectiveness of government expenditure in promoting growth depends on the quality of institutions. Strong institutions are crucial for ensuring that public funds are allocated efficiently and effectively to productive sectors of the economy. Furthermore, the study finds evidence of heterogeneity among the four countries, suggesting that the impact of institutional quality and government expenditure on economic growth varies across different contexts. For instance, Nigeria exhibits a stronger relationship between government expenditure and economic growth compared to the other countries, emphasizing the importance of country-specific factors in shaping growth dynamics. Overall, the results underscore the significance of institutional quality and government expenditure in driving economic growth in West Africa. Policymakers in these countries should prioritize reforms aimed at strengthening institutions and enhancing the efficiency of public spending to promote sustainable economic development. Future research could explore additional factors such as foreign direct investment and trade openness to provide a more comprehensive understanding of the drivers of economic growth in the region.

Project Overview

<p> </p><p>In line with the search for the real determinant of economic growth, this work sought to analyze the impact of institutional quality, government expenditure on economic growth, using a panel data analysis for four selected West African Countries (Nigeria, Ghana, Sierra Leone and Burkina Faso) from 2005 to 2013. The study found a positive and significant relationship between some institutions – economic institutions, on economic growth whereas political institutions showed a negative and insignificant effect on economic growth in Nigeria, Ghana, Sierra Leone and Burkina Faso. Also the empirical findings reveal a very positive and significant impact of government expenditure on economic growth and finally, structural policy institution was found to impact positively on the government expenditure outcomes in these countries, throughout the period of study. Based on the findings, the researcher recommends a concerted effort towards sanitizing the various institutions in order to improve on the policy making and execution of the various countries and by implication increase economic growth in countries. Also governments should channel their public expenditure endeavors towards the productive sector (Education, Health etc) and on the provision of the requisite developmental infrastructures. Finally, institutions play a vital role in the achievement of sustainable growth and development.</p><p><strong>Keywords</strong>: Institutional quality, Government expenditure, Economic growth, Good Governance</p> <br><p></p>