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

Abstract

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.

IMPACT STATEMENT

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.

Keywords:

• Africa
• human capital
• governance
• inclusive growth

REVIEWING EDITOR:

• Professor Goodness Aye, University of Agriculture, Makurdi Benue State, Nigeria

SUBJECTS:

• Development Economics
• Economic growth
• Inclusiveness
• Macroeconomics

JEL CLASSIFICATION:

• H11
• J24
• O15
• O55
• Q01
• R50

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available upon reasonable request from the authors.

Authors’ contributions

P.E.O.: conceptualization, methodology, data analysis and writing initial draft; A.K.: Introduction, Interpretation, comments and suggestions; B.Q.: data collection, data curation, conclusion and policy implications. All authors have read and agreed to the published version of the manuscripts.

Notes

1 See Table A2 in the Appendices for list of African countries considered for the study.

Additional information

Notes on contributors

Pamela Efua Ofori

Pamela Efua Ofori is a PhD candidate in the Department of Economics at the University of Insubria, Italy. She holds a double master’s degree in Global Entrepreneurship Economics and Management and Innovation and Change from the same institution and the Friedrich Schiller University, Jena, respectively. The author’s research interests include sustainability, gender inclusion, development economics, the economics of innovation, and environmental economics. She earned his B.S.c in Mathematics with Economics from the University of Cape Coast in Ghana.

Ametus Kuuwill

Ametus Kuuwill is currently a Ph.D. student at the Technische Universität Dresden, Germany. He is a scholar of the European Erasmus Mundus Joint Master’s Program in Sustainable Tropical Forestry, holding a double master’s degree in Forests and Livelihoods from the University of Copenhagen, Denmark, and Tropical Forest Management from the Technische Universität Dresden, Germany. Ametus previously worked as a Research Assistant at the Department of Soil and Land-use Management of the United Nations University (UNU-FLORES), where he focused on carbon forestry and plantation management. Prior to this, he graduated with a bachelor’s degree in economics from the University of Cape Coast, Ghana, and served as a Teaching and Research Assistant. His research interests include livelihood, forest management and governance, environmental and natural resource management, agricultural economics, economic growth, and plantation forestry.

Bright Quaye

Bright Quaye is a Ph.D. Economics candidate at Washington University in St. Louis. He earned his Bachelor of Science in Mathematics with Economics from the University of Cape Coast in Ghana. He subsequently obtained a Master of Science in Mathematics from Montana State University. Bright's research interests focus on areas such as Monetary and Fiscal Policy, Macrofinance, and Development Economics.