Poverty and the Role of Institutions in Sub-Saharan African Countries

Abstract

The main claim of this chapter is that political and economic institutions are the root cause of poverty in Sub-Saharan African countries. Therefore, the role of institutions on poverty in the countries of Sub-Saharan African economies is investigated during the period 2002-2019. Voice and accountability, government effectiveness, regulatory quality, and rule of law are institutional measures used in empirical analysis. In addition to these institutional indicators, different instrumental variables are also used to control for endogeneity. Poverty as the dependent variable is measured as the proportion of the population living on less than $1.90 a day. The empirical results, based on the common correlated effects mean group (CCEMG) and augmented mean group (AMG) estimator, suggest that when institutional quality increases, poverty levels decrease in the long run. The policy implication of this chapter is that institutional development should be realized to combat poverty as a precondition for these countries.