Governance quality and economic growth in Sub-Saharan Africa: the dynamic panel model

PurposeThe main objective of this article is to analyze the role of governance quality in influencing the economic growth of 22 selected Sub-Saharan African Countries.Design/methodology/approachThe study applied the panel dynamic Generalized Method of Moments (GMM) to analyze the data obtained from the World Bank database over the period from 2002 to 2020.FindingsThe overall finding indicated that the composite governance index has a positive significant effect on the economic growth of the countries; where a unit improvement in the aggregate governance index leads to a 3.05% increase in GDP. The disaggregated result has shown that corruption control and government effectiveness have a negative significant effect on growth performance, whereas, the rule of law and regulatory quality showed a positive significant effect. Political stability and voice and accountability have an insignificant effect on economic growth.Research limitations/implicationsDue to data limitations, this study could not address the whole members of Sub Sahara African Countries and could not see the causal relationship.Practical implicationsThe study suggested a strong commitment to the implementation of policy and reform measures on all governance factors. This may add to the need to devise participatory corruption control mechanisms; to closely look at the proper implementation of policies and reforms that constitute the government effectiveness factors, and properly implement the rule of law at all levels of the government with a strong commitment to realizing it so that citizens at all levels can have full confidence in and abide by the rules of society.Originality/valueEven though there are some studies conducted using conventional methods of panel data analysis such as random effect or fixed effects, this empirical study used more advanced panel dynamic generalized moment of methods to examine the role of improvement in governance quality on economic growth.

Mediating role of trust in the relationship between public governance quality and tax compliance

This paper examined the mediating role of trust in government on the influence of public governance quality indicators (accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption) on tax compliance in Africa. Cross-country data obtained from 38 African countries for 2015 was used and analyzed using Ordinary Least Squares (OLS) regression analysis. The study found that accountability, political stability, control of corruption, and trust have a significant influence on tax compliance among the sampled African countries, but government effectiveness, regulatory quality, and the rule of law and have insignificant influence on tax compliance. The result of the mediating effects revealed that trust mediates the influence of accountability and political stability on tax compliance in Africa. However, it failed to mediate the influence of government effectiveness, regulatory quality, rule of law, and control of corruption on tax compliance among sample African countries. The study offers theoretical insights on the role of trust as a mediator on social exchange relationships from the context of public governance quality on tax compliance. It also implies to the policymakers that building trust is an important mechanism through which the impact of public governance on tax compliance would be more pronounced. The study further calls for replication of its findings in other continents such as the Americas, Asia, and Europe.

The Impact of Corporate Social Responsibility on Regulatory Comment Letters: Evidence from Iran

Securities commissions regularly review corporate reports, and if the review reveals a possible deficiency— such as a potential accounting error— or requires further clarifications, they send the company a comment letter (CL), including a request for providing written responses and relative additional information. Current study aims to examine whether and how corporate social responsibility (CSR) affects CLs. This empirical study is based on a sample of 437 Iranian firm year observations from 2011 to 2017. Results show that firms with more CSR are less likely to receive CL, that more CSR does not influence the association of managerial misbehavior and CLs, and that the negative association between CSR and CLs is stronger among firms facing higher environmental information asymmetry and firms having higher corporate governance quality. Collectively, this paper contributes to the literature by providing new evidence on the beneficial effect of CSR in the context of CLs. Las comisiones de valores revisan periódicamente los informes de las empresas, y si la revisión revela una posible deficiencia -como un posible error contable- o se requiere más aclaraciones, envían a la empresa una carta de comentarios (CL), que incluye una solicitud de respuesta por escrito y la relativa información adicional. El presente estudio pretende examinar si la Responsabilidad Social de las Empresas (RSE) afecta a las cartas de comentarios y cómo lo hace. Este estudio empírico se basa en una muestra de 437 observaciones anuales de empresas iraníes desde 2011 hasta 2017. Los resultados muestran que las empresas con más RSC tienen menos probabilidades de recibir CL y que más RSC no influye en la asociación entre mal comportamiento de los directivos y CL. También se pone de manifiesto que la asociación negativa entre RSC y CL es más fuerte entre las empresas que enfrentan una mayor asimetría de información ambiental y las empresas que tienen una mayor calidad de gobierno corporativo. En conjunto, este trabajo contribuye a la literatura aportando nuevas pruebas sobre el efecto beneficioso de la RSC en el contexto de las CL.

African Asylum Seekers in Europe: The Interplay between Foreign Aid and Governance in Origin Countries

This paper empirically investigates the effects of governance quality on the number of African asylum seekers in Europe over the period 1996–2018 and evaluates the extent to which official development aid acts as a catalyst. With this purpose in mind, different gravity model specifications and estimation approaches have been employed. The obtained results suggest that the asylum flows are strongly determined by governance quality in the country of origin and that this effect does depend on the amount of foreign aid received from developed countries. Moreover, it is also found that development aid is only effective in reducing asylum applications coming from countries with good governance. Moreover, we find no differences in the estimated elasticity of foreign aid on asylum claims for the beneficiaries of the European Union Emergency Trust Fund (EUTF) for Africa, the main aim of which has been to improve living conditions of potential migrants in their countries of origin.

The Effects of Financial Development and Governance Quality on Economic Growth: Evidence from Developed and Developing Countries

This paper investigates the effects of financial development on economic growth with especial emphasis on the role played by governance quality. An indicator of governance built from the Principal Component factor method (PCF) and which takes into account the simultaneous effects of political, institutional and economic governance, is used in mediating such relationship. The study is carried out using a two-step system dynamic GMM method for 93 developed and developing countries over the 1996–2018 period. The findings from the study revealed that the effects of financial development on economic growth various according to the nature of governance and the level of development of countries. Results show a non-significant effect of financial development on economic growth for low-income countries and a positively significant impact in middle and high-income ones. Estimations demonstrate also that good governance plays an important and significant role in mediating the finance-growth relationship. Finally, results demonstrate that there is a certain threshold level that countries must achieve to make government domestic credit to private sector favorable to economic growth.

Exploring the Fiscal Responsibility through Active Citizenship for Governance Quality

Active citizenship emphasizes the importance of understanding its added value to fiscal responsibility and governance quality for economic and sustainable growth. Firstly, the paper aims to review issues in the literature pertinent to the debate on the role and the characterization of active citizenship. Secondly, using a linear regression model, we provide new evidence on the relationship between active citizenship, on the one hand, and fiscal responsibility, government quality, and economic growth, on the other hand, for the 27 European Union countries, over the period from 2006 to 2019. Our results highlight that active citizenship determines a more responsible and efficient activity of government based on fiscal responsibility, contributing to economic growth and sustainable development.

Forest governance and development effects on tropical charcoal production and deforestation

Severe loss and degradation of tropical forests affects ecosystem services and livelihoods. Charcoal, an important energy and income source for millions of people, causes 7% of tropical deforestation and forest degradation. Forest governance aims at managing forest-related issues. On the one hand, development allows for financial investments in forest governance, e.g., in monitoring and enforcement, which the aim to control deforestation. On the other hand, deforestation often continues with increased human wellbeing. Here, we aim to (i) globally examine effects of forest governance on charcoal production and deforestation, and (ii) understand its association with development. We developed a typology of tropical forest governance systems based on a literature review of 54 USAID Country Profiles and combined it with global data on charcoal production, deforestation, governance quality and development. Our results suggest that countries’ development status affects charcoal production rather than governance quality; we observe a negative relationship between development status and charcoal production per capita (HDI: F(1,50) = 4.85, p = 0.032; GNI: F(1,50) = 4.64, p = 0.036). The limited influence of governance quality and rights on charcoal production per capita and deforestation suggests mismatches between formal and informal governance and exposes challenges in top-down percolation of governance goals. Our results highlight potential importance of tenure rights and potential opportunities for regional governing bodies to bridge local formal and informal actors to improve forest governance. Positive effects of regional tenure are driven by mixed effects of high development and governance quality related to decentralization in Asia and South America, highlighting transitions from charcoal as livelihood energy source to global commodity. Variability in results for FAO and UN charcoal production data advocates for better monitoring programs. Yet, for the first time, we explore global interactive patterns in charcoal production, development and governance – a starting point to differentiate good governance.