Poverty in Sub-Saharan Africa: The Role of Business Regulations, Policies and Institutions

Abstract

The study investigates the impact of business regulations, policies and institutions on welfare in Sub-Saharan Africa. The HDI and GDP per capita are used as measures of welfare or poverty. The World Bank doing business indicators are used as business regulatory measures and the Country Policy and Institutional Assessment are also used as policies and institutional quality measures. The study employs systems GMM estimation technique in examining these relationships. The results show improved welfare in SSA countries to be associated with less burdensome regulations on starting business. The results reveal that merely pursing regulations in respect of business operations and closure such as those related to getting electricity, protecting minority interest, paying taxes and resolving insolvency as a strategy to improve welfare directly does not work unless done within a milieu of sound policies and institutions. There are however threshold values at which policy and institutional quality indexes can complement regulations to improve welfare. Following a formal sample-splitting, the study finds some differences in these relationships explained by the income status as well as the legal origin of the countries. Policy implications are well discussed.

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Acknowledgement

I would like to thank the Editor, and anonymous referees for helpful comments and suggestions. I also thank Matthew Ntow-Gyamfi for comments on earlier drafts of the study. The usual disclaimer applies.

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Correspondence to Richard Adjei Dwumfour.

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Appendices

Appendix 1

List of Countries

Angola, Benin, Burkina Faso, Burundi, Cape Verde, Central African Republic (CAF), Cameroon, Chad, Comoros, Congo, Dem. Rep., Congo, Rep., Cote d’Ivoire, Eritrea, Ethiopia, Gambia, Ghana, Guinea, Kenya Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Sudan, Tanzania, Togo, Uganda, Zambia, Zimbabwe.

Appendix 2

See Table 10

Table 10 Variable definition and data sources

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Dwumfour, R.A. Poverty in Sub-Saharan Africa: The Role of Business Regulations, Policies and Institutions. Soc Indic Res 149, 861–890 (2020). https://doi.org/10.1007/s11205-020-02277-z

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Keywords

  • Poverty
  • Welfare
  • Sub-Saharan Africa
  • Doing business
  • Policies
  • Institutions

JEL Classification

  • I31
  • I32
  • K15