Governance and Economic Development in West Africa: Linking Governance with Economic Misery

Abstract

In this study, we explored how governance could influence economic misery. Consideration is made of 16 West African countries from 2005 through 2020. The governance indicators used in the study include voice and accountability; political stability and absence of violence/terrorism; government effectiveness; regulatory quality; the rule of law; and control of corruption. Barro's misery index was computed and used in this study. The analysis used the pooled ordinary least squares (OLS), fixed and random effect models, and the Granger causality test. The Granger causality test indicated that unidirectional causality runs from government effectiveness, political stability and absence of violence/terrorism, and regulatory quality to economic misery. For the pooled OLS, only voice and accountability aided in reducing economic pain in a significant manner, while the rule of law aggravated financial distress. In the Fixed effect model, none of the governance indicators could significantly influence economic misery, while in the Random effect model, voice and accountability with regulatory quality significantly reduced financial discomfort. Government effectiveness has not in any way exerted a significant influence on economic misery within the study period. Other variables that substantially influenced economic distress within West Africa were trade liberalisation and credit to the private sector, as they both significantly reduced economic misery. The weak governance indicators show poor institutional quality intensifies economic pain within the West African region.