The role of institutions in economic development: Evidence from 27 Sub-Saharan African countries

Purpose – The purpose of this paper is to explore the alleged link between institutional quality and economic performance in 27 Sub-Saharan Africa (SSA) countries during the period 1984-2003. Design/methodology/approach – Four institutions' quality indicators, namely government stability, corruption, ethnic tensions and socioeconomic conditions, along with other control and policy variables, are employed in a panel data analysis. Findings – The institutional variables assume a key role in the process of economic development whereas the control variables display a limited effect. Thus, the “conventional variables” of economic theory may not be able to fully explain the SSA experience. Research limitations/implications – Future research efforts should explore how the vast changes experienced by the countries in that region influenced their economic evolution during the last decades. Practical implications – Policy makers should primarily focus on improving institutional quality, which is likely to positively affect economic performance in SSA countries. Social implications – Improving institutional infrastructure (enhancing rule of law and quality regulation, improving contract enforcement, securing property rights and reducing uncertainty) play a key role in delivering long-run economic development and social prosperity. Originality/value – The paper analyzes the impact of institutional quality on economic performance using data from 27 SSA countries.