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State Capacity and Growth in Sub-Saharan Africa: A Dynamic Panel Examination of Smith’s Pillars of Prosperity

2023; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.4598989

1556-5068

Lloyd George Banda,

Fiscal Policy and Economic Growth

Purpose – This article aligns with the 2030 United Nations global goals 16 and 8, which strive to "enhance peace, justice and strong institutions" and "promote decent work and economic growth." Thus, the study seeks to explore the current state of state capacity or otherwise political and economic institutions and the influence thereof on economic prosperity through the lens of Adam Smith's triumvirate of security, fiscal, and legal capacities.Design/methodology/approach – A micro panel dataset, therefore, was constructed from the Mo Ibrahim Index of African Governance and the World Bank Worldwide Development Indicators for a sample of 46 Sub-Saharan African (SSA) countries (2012 – 2021). The study employed the dynamic endogeneity one-step system Generalized Method of Moments (SyGMM) and the quantile regression (QR) to analyze the dataset.Findings – First, the study refutes Martin & Runland's (2018) typology of state capacity and development by excusing some Sub-Saharan African countries into the 'low-high' and 'high-low' quadrants. Second, all estimators ascertain that Smith's triumvirate holds for Sub-Saharan Africa. Lastly, the elasticity of fiscal capacity conforms to the common knowledge that fiscal capacity is the core indicator of state capacity. While the findings call for SSA countries to invest in all three capacities, individual results indicate that SSA countries should prioritize security and fiscal capacities to achieve the highest degree of opulence like OECD countries.Originality/value – The manuscript atypically examines Adam Smith's hypothesis of security, fiscal and legal capacity, and the impact thereof on economic prosperity in Sub-Saharan Africa.