Governance Quality and Economic Performance in Sub-Saharan Africa: Evidence from Panel Data Analysis

Abstract

This study examines the effect of governance quality on economic performance in Sub-Saharan Africa using panel data for 23 countries over the period 2004–2024. The study employs panel estimation techniques, including pooled ordinary least squares, fixed effects, and random effects models. The Hausman specification test indicates that the fixed effects model is the most appropriate for the analysis. To ensure robust statistical inference and control for both country-specific and time-specific effects, the study further employs a two-way fixed effects model with White cross-section robust standard errors. The findings reveal that voice and accountability, trade openness, and government effectiveness exert positive effects on economic performance, with voice and accountability and trade openness remaining statistically significant, while government effectiveness is weakly significant. Other governance indicators were not statistically significant. The results suggest that governance influences economic performance in a dimension-specific manner, with accountability and institutional effectiveness playing more prominent roles in promoting economic performance within the region. The study concludes that strengthening institutional accountability, improving governance effectiveness, and promoting trade openness are essential for enhancing economic performance in Sub-Saharan Africa.