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Institutions, economic freedom and structural transformation in 11 sub-Saharan African countries

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  • Carraro, Alessandro
  • Karfakis, Panagiotis

Abstract

Good institutions are a fundamental pre-requisite to successfully achieve structural transformation in growing developing countries (UNECA, 2016). Sub-Saharan Africa is experiencing a rapid growth but a weak and slow structural transformation process, which is mainly characterized by the reallocation of labour from agriculture to low skilled services. The focus of this paper is to explore how political and economic institutions affect structural transformation in a panel of 11 sub-Saharan African countries. Our empirical analysis reveals a positive and statistically significant effect of quality of institutions and economic freedom measures on structural transformation between sectors, which translates into movement out of agriculture. Better institutions appear to not improve productivity within sectors, however results highlight the important role played by institutions in facilitating reallocation or resources across sectors. Our findings suggest that improving the legal system, providing a stable macroeconomic environment, and improving freedom to exchange across borders will facilitate structural transformation processes in sub-Saharan African countries. We finally recommend that measures undertaken by governments should be included in a set of targeted policies designed according to countries' characteristics.

Suggested Citation

  • Carraro, Alessandro & Karfakis, Panagiotis, 2018. "Institutions, economic freedom and structural transformation in 11 sub-Saharan African countries," ESA Working Papers 288957, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    • Handle: RePEc:ags:faoaes:288957
    DOI: 10.22004/ag.econ.288957
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    Cited by:

    1. Gniniguè, Moukpè & Awade, Essossolim, 2023. "Diaspora as Driver of Agricultural Structural Transformation in West Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 11(3), June.
    2. Haldar, Anasuya & Sethi, Narayan, 2022. "Effect of sectoral foreign aid allocation on growth and structural transformation in sub-Saharan Africa—Analysing the roles of institutional quality and human capital," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1010-1026.
    3. Hayat Khan & Ying Dong & Robeena Bibi & Itbar Khan, 2024. "Institutional Quality and Foreign Direct Investment: Global Evidence," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10547-10591, September.
    4. Peter Asare-Nuamah & Anthony Amoah & Simplice A. Asongu, 2021. "Achieving food security in Ghana: Does governance matter?," Working Papers of the African Governance and Development Institute. 21/090, African Governance and Development Institute..
    5. Michael Effah Asamoah & Imhotep Paul Alagidede & Frank Adu, 2021. "Private Capital Flows, Real Sector Growth and Institutional Quality in Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(1), pages 171-207, January.

    More about this item

    Keywords

    Consumer/Household Economics; Institutional and Behavioral Economics; Agricultural and Food Policy;
    All these keywords.

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