Is the Quality of Governance a Precursor for Regional Disparity or Prosperity?

Abstract

Abstract This study looks at the impetus of quality of state governance in supporting regional inclusiveness akin to developing the Sub-Saharan African region. Whereas the intrinsic value of state governance quality as anecdotes of better development in unique ways is universally accepted and portrays the notion of an inclusive society, its fundamental significance as a path toward equal income distribution and inclusive economic performance is still scantily understood despite the widely emerging literature. This paper's main aim is twofold: review the rising literature and, in a unique way, take a deeper look at the link between the quality of governance and regional disparity or prosperity. Secondly, the paper evaluates where the developing Sub-Saharan Africa stands in various measures of quality of governance and how it influences income inequality. The study utilizes balanced panel data from 22 Sub-Saharan African countries from 2000 to 2021. Further, the study models the relationships between the variables using Panel Fixed Effects (Panel FE-IV) and generalized system method of moments (SsyGMM). The findings show a significant positive link between government effectiveness and income inequality. Also, the results show the non-significant role of FDI in explaining increasing income inequality in SSA, paving the way for future research to interrogate the essence of FDI in promoting economic prosperity, primarily when the SSA region is heavily relying upon FDI inflows for development.