Effect of human capital development and institutional quality on inclusive growth in African countries

The study examines the impact of human capital and governance on inclusive growth in Africa. It further explores how governance dynamics influence the relationship between human capital and inclusive growth. Drawing on macro data spanning 43 African countries from 2005 to 2020 and employing the two-step system generalized method of moments (SYS-GMM) estimation technique, the following findings emerge. First, human capital promotes inclusive growth in Africa, while governance has a diminishing effect. Second, the six governance indicators counteracted the positive effect of human capital on inclusive growth. This means that negative governance dynamics completely nullify/dampen the positive effect of human capital on inclusive growth. In conclusion, the anticipated benefits of human capital in fostering inclusive growth may remain elusive unless significant improvements are made to Africa’s weak institutional fabric.This research sheds light on SDGs 4 and 10 by providing a comprehensive understanding concerning the interaction between human capital development and governance, and their effect on inclusive growth in the context of Africa. This study establishes that human capital development promotes inclusive growth whereas governance hinders it. Compelling evidence from the interactive analysis shows that governance nullifies the positive effect of human capital on inclusive growth. The main message from this research is that Africa’s poor economic, political, and institutional governance undermines the role of human capital development in inclusive growth. This research calls for proactive investments that enhance Africa’s institutional fabric and human capital development.