Does Governance Matter In Infrastructure: Evidence From Sub-Saharan Africa

Abstract

This study empirically examines the pattern of physical infrastructure that would unlock the productive potential of sub-Saharan Africa. The estimations were carried out in a panel of 21 selected sub-Saharan African countries over the period 2000 to 2010 using the two-stage least squares (TSLS) estimation techniques. The infrastructure variable was constructed on the basis of three physical infrastructure stocks (roads, telecommunication and electricity) using the principal component analysis (PCA), and governance was measured using the worldwide governance indicators. The results conform to the findings of existing literature; namely, that real output, government capital expenditure, external balance and inflation are significant determinants of physical infrastructure in sub-Saharan Africa. The distinctive feature of the study is the significant role played by governance in explaining physical infrastructure. The results from the panel estimations reveal that investment in governance/institutional structures is a necessary first step in providing quality infrastructure stock and, hence, pro-poor, long-term economic growth for the region. Therefore, in modelling physical infrastructure, it is imperative to incorporate the important role played by governance.