Institutional Quality Differences Explaining Growth Differences Between Sub-saharan Africa And East Asia.

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The economic performance of most of the Sub-Saharan countries is not satisfactory asrncompared to that of East Asian countries. The issue of economic growth has been thernconcern of economists with the intent of answering the question as to why there arerndifferences in the growth rates across countries. The impact of quality of institutions onrneconomic performance is the subject of much debate among economists recently.rnMany researches that have analyzed the factors causing difference in the rates ofrneconomic growth have found factors such as quality of institutions, geographicalrnlocation, integration in international trade and culture among other things to explain thernobserved differences in per-capita income. While some studies like Sachs and Warnerrnassign the prominent role to Geography, others concentrate on different factors such asrninstitutions and integrations for causing the difference in economic performance amongrnregions and countries.rnThis paper develops a case that differences in the quality of institutions is one of thernfundamental cause of differences in growth between SSA countries and some East Asianrncountries. The Arellano-Bond (1991) and Arellano-Bover (1995) linear generalizedrnmethod of moments (GMM) is used to estimate the neoclassical growth model SolowrnAugmented with institution to asses the impact of institutional quality difference onrngrowth difference.rnThe result of this study suggest that gross capital formation, population growth,rngeography and the quality of institutions are the major factors causing differences inrngrowth rates. Mainly the study concludes that improvement in the quality of institution byrnthe same amount in the two regions under consideration has a higher impact on growthrnfor SSA countries than the East Asian countries considered. Thus the SSA countriesrnshould also concentrate on building social infrastructure which is equivalent to improvingrninstitutional quality to encourage productive behavior for registering higher economicrngrowth.

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Institutional Quality Differences Explaining Growth Differences Between Sub-saharan Africa And East Asia.

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