Examining the Impact of Human Capital Development and Governance Institutions on Economic Growth in Sub-Saharan Africa
Abstract
This study examines the effects of human capital development and governance institutions on economic growth in Sub-Saharan Africa. Using annual panel data from 41 countries covering the period 2010–2022, the study applies the System Generalised Method of Moments (System GMM) estimator to account for the dynamic nature of economic growth, unobserved country-specific heterogeneity, and potential endogeneity. The study measures human capital development with the Human Capital Index and life expectancy, and captures institutional quality through government effectiveness, control of corruption, regulatory quality, political stability, rule of law, and voice and accountability. The findings reveal that the Human Capital Index has a positive and statistically significant effect on economic growth in one model specification, although the relationship is not statistically significant in the alternative specification. Among the governance indicators, government effectiveness shows the most consistent positive relationship with economic growth, while control of corruption and rule of law are significant only in selected specifications. Foreign direct investment contributes positively and significantly to economic growth in both models, whereas government expenditure on education and several governance indicators remain statistically insignificant. Furthermore, the COVID-19 pandemic has a substantial negative effect on economic growth. The findings show that human capital development and selected dimensions of institutional quality matter for economic performance in Sub-Saharan Africa, although their effects vary across model specifications. The study highlights the importance of strengthening human capabilities, government effectiveness, institutional capacity, and productive investment to support sustainable economic growth in the region.
- Human capital development supports economic growth in Sub-Saharan Africa.
- Government effectiveness positively influences economic growth.
- Foreign direct investment significantly promotes economic growth.
- Governance dimensions show heterogeneous effects across model specifications.
- COVID-19 significantly reduced economic growth across the sampled countries.
Article information
How to Cite
References
Abera, F., Mulugeta, W., & Melaku, T. (2019). Impact of institutional quality on economic performance of Eastern Africa: A panel data analysis. Jurnal Perspektif Pembiayaan dan Pembangunan Daerah, 7(2), 169-182. https://doi.org/10.22437/ppd.v7i2.7863
Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as the fundamental cause of long-run economic growth. Handbook of Economic Growth, 1(A), 1-72. https://doi.org/10.3386/w10481
Adeyemi, P. A., & Ogunsola, A. J. (2016). The impact of human capital development on economic growth in Nigeria: ARDL approach. Journal of Humanities and Social Science, 24(6), 34-41.
Alston, L. (1992). Institutions, Institutional Change and Economic Performance: Douglass C. North (Cambridge University Press, New York, 1990) pp. viii+ 152, hardcover $32.50, paper $10.95. Journal of Economic Behavior & Organization, 18(1), 142-144. https://doi.org/10.1016/0167-2681(92)90062-G
Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of econometrics, 68(1), 29-51. https://doi.org/10.1016/0304-4076(94)01642-D
Arshad, H. (2019). Foreign direct investment, institutional quality, and economic growth. Munich Personal RePEc Archive. Retrieved from https://mpra.ub.uni-muenchen.de/91213/
Asghar, N., Qureshi, S., & Nadeem, M. (2015). Institutional quality and economic growth: Panel ARDL analysis for selected developing economies of Asia. A Research Journal of South Asian Studies, 30(2), 381-404.
Awolusi, D. O. (2019). Human capital development and economic growth in BRICS countries: Controlling for country differences. Journal of Economics and Behavioral Studies, 11(4), 1-7. https://doi.org/10.22610/jebs.v11i4(J).2912
Barro, R., & Sala-i-Martin, X. (1995). Empirical analysis of a cross section of countries. Economic Growth, 414-459.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics, 87(1), 115-143. https://doi.org/10.1016/S0304-4076(98)00009-8
Bond, S. R. (2002). Dynamic panel data models: a guide to micro data methods and practice. Portuguese economic journal, 1(2), 141-162. https://doi.org/10.1007/s10258-002-0009-9
Gasimov, I., Asgarzade, G., & Jabiyev, F. (2023). The impact of institutional quality on economic growth: Evidence from post-Soviet countries. Journal of International Studies, 16(1), 71-82. https://doi.org/10.14254/2071-8330.2023/16-1/5
Glawe, L., & Wagner, H. (2020). The role of institutional quality and human capital for economic growth across Chinese provinces: A dynamic panel data approach. Journal of Chinese Economic and Business Studies, 18(3), 209-227. https://doi.org/10.1080/14765284.2020.1755140
Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the econometric society, 1029-1054. https://doi.org/10.2307/1912775
International Monetary Fund. (2024). Regional economic outlook: Sub-Saharan Africa – Reforms amid great expectations. International Monetary Fund.
Javed, M., Abbas, S., Alvina, F., Azeem, M. M., & Zafar, S. (2013). Impact of human capital development on economic growth of Pakistan: A public expenditure approach. World Applied Sciences Journal, 24(3), 408-413. https://doi.org/10.5829/idosi.wasj.2013.24.03.1087
Khalafalla, A. M. A., & Suliman, Z. S. A. (2013). The impact of human capital on economic growth: Empirical evidence from Sudan. Research in World Economy, 4(2), 43-53. https://doi.org/10.5430/rwe.v4n2p43
Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of monetary economics, 22(1), 3-42. https://doi.org/10.1016/0304-3932(88)90168-7
Ma, L., Gan, Y., & Huang, P. (2025). Higher education investment, human capital, and high-quality economic development. Finance Research Letters, 71, 106419. https://doi.org/10.1016/j.frl.2024.106419
Nawaz, S., Iqbal, N., & Khan, M. A. (2014). The impact of institutional quality on economic growth: Panel evidence. The Pakistan Development Review, 53(1), 15-31. https://doi.org/10.30541/v53i1pp.15-31
Ogbuabor, J. E., Orji, A., Manasseh, C. O., et al. (2020). Institutional quality and growth in West Africa: What happened after the Great Recession? International Advances in Economic Research, 26, 343-361. https://doi.org/10.1007/s11294-020-09805-0
Pelinescu, E. (2015). The impact of human capital on economic growth. Procedia Economics and finance, 22, 184-190. https://doi.org/10.1016/S2212-5671(15)00258-0
Raihan, A., Rahman, S. M., Ridwan, M., Dhar, B. K., Martinho, D., & Sarker, T. (2026). Environmental sustainability indicators in India: Evidence from ecological footprint, load capacity factor, nuclear energy, and human capital. Environmental and Sustainability Indicators, 101197. https://doi.org/10.1016/j.indic.2026.101197
Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The stata journal, 9(1), 86-136. https://doi.org/10.1177/1536867X0900900106
Schultz, T. (1961). Investment in human capital. American Economic Review, 51(1), 1-17.
Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65-94. https://doi.org/10.2307/1884513
Taiwo, A., & Olusola, J. O. (2020). Human capital formation and economic growth in sub-Saharan African countries. The Indian Economic Journal, 68(2), 249-268. https://doi.org/10.1177/0019466220972848
Usman, F. K., & Adeyinka, O. (2019). Effect of human capital development on economic growth of ECOWAS member states. Advances in Sciences and Humanities, 5(1), 27-42. https://doi.org/10.11648/j.ash.20190501.14
Valeriani, E., & Peluso, S. (2011). The impact of institutional quality on economic growth and development: An empirical study. Journal of Knowledge Management, Economics and Information Technology, 1(6), 1-25.
Wang, M. L., Ntim, V. S., Yang, J., Zheng, Q., & Geng, L. (2022). Effect of institutional quality and foreign direct investment on economic growth and environmental quality: Evidence from African countries. Economic Research-Ekonomska Istraživanja, 35(1), 4065-4091. https://doi.org/10.1080/1331677X.2021.2010112
World Bank. (2024a). Africa's Pulse, No. 29: Tackling inequality to revitalize growth and reduce poverty in Africa. World Bank. https://doi.org/10.1596/978-1-4648-2109-7
World Bank. (2024b). Africa's Pulse, No. 30: Transforming education for inclusive growth. World Bank. https://doi.org/10.1596/978-1-4648-2176-9
Authors
How to Cite
License
Copyright (c) 2026 Emmanuel C. Agbo, Christian Agu
This work is licensed under a Creative Commons Attribution 4.0 International License.
This journal provides immediate and free open access to all its content and is distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0). This means readers are permitted to read, download, copy, distribute, print, search, or link to the full texts of articles, or use them for any other lawful purpose, without asking prior permission from the publisher or the author, as long as proper attribution is given. This policy is consistent with the Budapest Open Access Initiative (BOAI) definition of open access.