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

Figures & data

Figure 1. Conceptual Framework for Inclusive Growth.

Table 1. Variable description and sources.

Variables	Description of variables	Symbols	data sources
Outcome variables
Inclusive Growth	It is described as the integration of economic growth and income distribution generated based on Anand et al. (2013)	ig	Generated
Gini	Gini income (0 = Lowest; 1 = Highest)	gini	WDI; GCIP
GDP per capita	GDP per capita, PPP (constant 2017 US$)	gdppc	WDI
Predictor variables
Human capital index	Measured as average years of education and the rate of return of education in all countries	hc	Penn World
Moderator variables
Governance	It comprises six governance indicators which are political stability (PS), governance effectiveness (GE), regulatory quality (RQ), voice and accountability (VA), rule of law (RL) and control of corruption (CC). Falls within a range from −2.5 to +2.5, which signifies that the more negative shows poor institutional quality in the country and vice-versa.	gov	WGI
Control variables
Economic globalisation	Captures trade in goods and services; customs duties, taxes, and trade restrictions; capital account openness and international investment (including FDI) agreements	ecoglob	KOF index
Population	Total population	pop	WDI
Domestic Investment	Gross fixed capital formation as a percentage of GDP	dinv	WDI
Vulnerable employment	Contributing family workers and own-account workers (% total employment	vul	WDI

Notes. WDI: World Development Indicators of the World Bank. WGI: World Governance Indicators of the World Bank. GCIP, Global Consumption and Income Project; KOF Index, Konjunkturforschungsstelle.

Table 2. Summary statistics (2005–2020).

Variables	N	Mean	Std. Dev	min	max
Outcome variable
Inclusive growth	615	0.088	0.105	0.036	1.000
Gini	615	6.435	15.770	0.000	64.800
GDP per capital	615	4072.076	4190.239	751.664	22870.286
Predictor variable
Human capital	520	1.802	0.445	1.117	2.939
Moderating variables
Control of corruption	615	−0.608	0.606	−1.563	1.16
Government effectiveness	615	−0.739	0.593	−1.848	1.057
Voice and accountability	615	−0.455	0.673	−1.838	0.998
Rule of law	615	−0.643	0.592	−1.816	1.029
Regulatory quality	615	−0.610	0.530	−1.684	1.127
Political stability	615	−0.536	0.875	−2.699	1.200
Control variables
Economic globalization	561	38.184	12.135	12.000	81.000
Population	615	54.680	4.529	47.183	70.775
Domestic Investment	615	7.264	21.382	−65.689	239.83
Vulnerable employment	615	69.211	21.756	8.8300	94.400

Notes. N: Observations; Std.Dev: Standard deviation. Min.: Minimum. Max.: Maximum.

Table 3. Results for the direct effects of human capital and governance on inclusive growth (Dependent variable: Inclusive growth).

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Inclusive growth (-1)	0.5222***	0.5110***	0.5552***	0.5822***	0.5447***	0.5713***	0.5532***	0.5368***
	(0.0023)	(0.0035)	(0.0097)	(0.0064)	(0.0065)	(0.0101)	(0.0050)	(0.0042)
population	−0.0004	−0.0037***	0.0045***	0.0007	0.0006	0.0029**	0.0016*	−0.0004
	(0.0006)	(0.0007)	(0.0011)	(0.0007)	(0.0006)	(0.0014)	(0.0009)	(0.0007)
Vulnerable employment	0.0007***	0.0004**	−0.0008*	−0.0003	−0.0005**	−0.0013***	0.0001	0.0000
	(0.0002)	(0.0002)	(0.0004)	(0.0002)	(0.0002)	(0.0003)	(0.0003)	(0.0002)
Domestic investment	0.0001***	0.0003***	0.0002***	0.0001***	0.0001***	0.0001***	0.0001***	0.0001***
	(0.0000)	(0.0000)	(0.0000)	(0.0000)	(0.0000)	(0.0000)	(0.0000)	(0.0000)
Economic globalization	0.0007***	0.0011***	0.0004	0.0010***	0.0012***	0.0011***	0.0010***	0.0014***
	(0.0002)	(0.0002)	(0.0003)	(0.0002)	(0.0002)	(0.0002)	(0.0002)	(0.0002)
Human capital		0.0435***
		(0.0031)
Voice and accountability			−0.1326***
			(0.0079)
Government effectiveness				−0.0536***
				(0.0049)
Control of corruption					−0.0386***
					(0.0047)
Rule of law						−0.0805***
						(0.0097)
Political stability							−0.0312***
							(0.0040)
Regulatory quality								−0.0394***
								(0.0053)
Constant	−0.0212	0.0874**	−0.2397***	−0.0568	−0.0351	−0.1289	−0.1164	−0.0221
	(0.0434)	(0.0417)	(0.0875)	(0.0489)	(0.0454)	(0.0997)	(0.0739)	(0.0519)
Observations	521	451	521	521	521	521	521	521
Countries	40	38	40	40	40	40	40	40
Wald	22031	102733	1803	29717	7784	2455	5245	19408
Wald P-value	0	0	0	0	0	0	0	0
Instruments	36	37	37	37	37	37	37	37
Hansen P-Value	0.362	0.295	0.316	0.397	0.271	0.526	0.182	0.310
AR(1)	0.0472	0.0527	0.0460	0.0454	0.0464	0.0466	0.0471	0.0469
AR(2)	0.752	0.919	0.758	0.855	0.743	0.777	0.820	0.756

Notes. Standard errors in parentheses*** p < 0.01, ** p < 0.05, * p < 0.1.

Table 4. Results for the indirect effects of human capital and governance on inclusive growth (Dependent variable: Inclusive growth).

Variables	(1)	(2)	(3)	(4)	(5)	(6)
Inclusive growth (-1)	0.4194***	0.3657***	0.4118***	0.4363***	0.4401***	0.4453***
	(0.0130)	(0.0078)	(0.0122)	(0.0052)	(0.0117)	(0.0063)
Economic globalization	0.0025***	0.0029***	0.0023***	0.0031***	0.0022***	0.0021***
	(0.0004)	(0.0004)	(0.0005)	(0.0005)	(0.0004)	(0.0004)
population	−0.0069**	−0.0068	−0.0094***	−0.0092***	−0.0140***	−0.0138***
	(0.0029)	(0.0041)	(0.0033)	(0.0031)	(0.0032)	(0.0023)
Domestic investment	0.0004***	0.0007***	0.0008***	0.0005***	0.0008***	0.0005***
	(0.0000)	(0.0001)	(0.0001)	(0.0001)	(0.0001)	(0.0001)
Vulnerable employment	−0.0042***	−0.0040***	−0.0047***	−0.0047***	−0.0070***	−0.0053***
	(0.0010)	(0.0014)	(0.0012)	(0.0009)	(0.0009)	(0.0006)
Human capital	−0.1275***	−0.0983***	−0.0856***	−0.0982***	−0.1049***	−0.0766***
	(0.0405)	(0.0140)	(0.0108)	(0.0188)	(0.0163)	(0.0089)
Corruption control	0.0460
	(0.0317)
HC $\times$ Corruption control	−0.0343*
	(0.0185)
Government effectiveness		0.0339
		(0.0265)
HC × Government effectiveness		−0.0531***
		(0.0152)
Rule of law			−0.0110
			(0.0279)
HC × Rule of law			−0.0228
			(0.0149)
Regulatory quality				0.0775***
				(0.0238)
HC × Regulatory quality				−0.0819***
				(0.0161)
Political stability					0.0235*
					(0.0121)
HC × Political stability					−0.0265***
					(0.0082)
Voice and accountability						0.0954***
						(0.0283)
HC × Voice and accountability						−0.0708***
						(0.0130)
Constant	0.8273***	0.7163**	0.9020***	0.8868***	1.3749***	1.2060***
	(0.2395)	(0.3091)	(0.2518)	(0.2382)	(0.2274)	(0.1578)
Total/Net effect	−0.1060***	−0.0590 ***	−0.0709***	−0.0482***	−0.0906***	−0.0444***
	(0 .0320)	(0.0118)	(0 .0120)	(0.0180)	(0.0172)	(0.0085)
Observations	451	451	451	451	451	451
Countries	38	38	38	38	38	38
Wald	4110	9004	36665	10865	10304	2.960e + 06
Wald P-value	0	0	0	0	0	0
Instruments	36	40	40	40	40	40
Hansen P-Value	0.543	0.749	0.742	0.740	0.739	0.577
AR(1)	0.0439	0.0549	0.0495	0.0507	0.0482	0.0525
AR(2)	0.926	0.963	0.991	0.956	0.909	0.963

Notes. Standard errors in parentheses: *** p < 0.01, ** p < 0.05, * p < 0.1.

Table 5. Indicators used in constructing inclusive growth index.

Variables	Definition of variables	Source
GDP per capital	GDP per capita, PPP (constant 2017 US$)	WDI
Poverty	Poverty Headcount ratio at $1.90 (2011, PPP)	WDI
Gini Index	Income inequality proxied by the Gini index	WDI
Economic freedom	Ease of doing business (0 = lowest to 100 = best) performance	WDI
Electricity Access	Access to electricity (% of the population)	WDI
Social protection	CPIA social protection rating (1 = low to 6 = high)	WDI
Fuel Access	Access to clean fuels and technologies for cooking	WDI
Labour force	Total labour force participation rate	ILO
Wages & salaries	Wages and salaried workers (% total employment)	WDI
Education expenditure	Government expenditure on education (%GDP)	WDI
Mortality rate	Under-5 mortality per 1000 live births	WDI
Health expenditure	Domestic general government health expenditure (% of GDP)	WDI

Notes. WDI is World Development Indicator; ILO is International Labor Organization.

Source: Authors’ construct, 2023.

Figure 2. Scree plot of principal components of inclusive growth.

Table 6. Unconditional Effects of human capital development and institutional quality on inclusive growth (Dependent variable: Inclusive growth index).

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Inclusive growth (-1)	0.9510***	1.0027***	0.9333***	0.9546***	0.9463***	0.9435***	0.9583***	0.9375***
	(0.0276)	(0.0127)	(0.0301)	(0.0241)	(0.0278)	(0.0156)	(0.0271)	(0.0203)
Economic globalization	0.0008	0.0015*	−0.0007	0.0002	0.0010	0.0010	0.0028**	0.0005
	(0.0012)	(0.0008)	(0.0012)	(0.0009)	(0.0012)	(0.0008)	(0.0012)	(0.0008)
population	0.0173***	−0.0045*	0.0261***	0.0218***	0.0175***	0.0133**	0.0120*	0.0170***
	(0.0059)	(0.0026)	(0.0069)	(0.0064)	(0.0053)	(0.0053)	(0.0061)	(0.0056)
Investment	0.0004	0.0001	0.0006	0.0005	0.0003	0.0006	0.0000	0.0009
	(0.0006)	(0.0001)	(0.0006)	(0.0005)	(0.0005)	(0.0006)	(0.0004)	(0.0006)
Vulnerable employment	0.0015	−0.0022**	0.0025*	0.0044***	0.0028**	0.0009	0.0002	0.0019*
	(0.0012)	(0.0009)	(0.0013)	(0.0014)	(0.0011)	(0.0010)	(0.0014)	(0.0011)
Human capital		0.0034
		(0.0114)
Control of corruption			−0.0557**
			(0.0261)
Government effectiveness				−0.0608***
				(0.0220)
Rule of law					−0.0589***
					(0.0190)
Regulatory quality						−0.0168
						(0.0166)
Political stability							−0.0255*
							(0.0150)
Voice & accountability								−0.0742*
								(0.0367)
Constant	−1.0360***	0.3751*	−1.5614***	−1.4137***	−1.1067***	−0.7817**	−0.7444*	−1.0051***
	(0.3627)	(0.1875)	(0.4117)	(0.4155)	(0.3192)	(0.3446)	(0.3826)	(0.3523)
Observations	383	327	383	383	383	383	383	383
Countries	41	39	41	41	41	41	41	41
Wald	2281	3553	1442	1679	6401	2904	1950	2460
Wald P-value	0	0	0	0	0	0	0	0
Instruments	28	36	32	32	32	32	32	32
Hansen P-Value	0.339	0.521	0.362	0.379	0.329	0.474	0.394	0.709
AR(1)	0.0730	0.111	0.0693	0.0738	0.0702	0.0741	0.0766	0.0714
AR(2)	0.338	0.368	0.348	0.347	0.308	0.350	0.338	0.359

Notes. Standard errors in parentheses: *** p < 0.01, ** p < 0.05, * p < 0.1.

Table 7. Conditional Effects of human capital development and institutional quality on inclusive growth (Dependent variable: Inclusive growth index).

Variables	(1)	(2)	(3)	(4)	(5)	(6)
Inclusive growth index (-1)	0.4438***	0.9760***	0.9502***	0.9265***	0.9427***	0.9682***
	(0.1328)	(0.0326)	(0.0131)	(0.0208)	(0.0175)	(0.0165)
Economic globalization	0.0051*	0.0009	−0.0005	0.0010	0.0011	0.0008
	(0.0030)	(0.0007)	(0.0004)	(0.0007)	(0.0008)	(0.0007)
population	0.0416**	0.0055	0.0045	0.0048	0.0063*	0.0014
	(0.0174)	(0.0060)	(0.0033)	(0.0032)	(0.0032)	(0.0042)
Investment	−0.0003	−0.0001	−0.0005*	−0.0002	−0.0004*	0.0000
	(0.0006)	(0.0002)	(0.0003)	(0.0003)	(0.0002)	(0.0003)
Vulnerable employment	−0.0108***	−0.0009**	−0.0016**	−0.0016*	−0.0006	−0.0007
	(0.0035)	(0.0004)	(0.0006)	(0.0009)	(0.0005)	(0.0005)
Human capital	−0.3576**	−0.0739	−0.0649***	−0.0848*	−0.0724*	−0.0287
	(0.1646)	(0.0444)	(0.0232)	(0.0464)	(0.0389)	(0.0416)
Corruption control	0.8772**
	(0.3288)
HC $\times$ Corruption control	−0.4939***
	(0.1705)
Government effectiveness		0.0940
		(0.0999)
HC × Government effectiveness		−0.0880*
		(0.0506)
Political stability			0.2023***
			(0.0735)
HC × Political stability			−0.1142***
			(0.0406)
Rule of law				0.3562**
				(0.1353)
HC × Rule of law				−0.1882***
				(0.0666)
Regulatory quality					0.1962*
					(0.1090)
HC × Regulatory quality					−0.1287**
					(0.0564)
Voice and accountability						0.0712
						(0.1180)
HC × Voice and accountability						−0.0485
						(0.0659)
Constant	−0.9981	−0.1347	0.0611	0.0395	−0.1861	0.0266
	(0.8838)	(0.3398)	(0.1673)	(0.1895)	(0.1847)	(0.2109)
Total/Net effect	−0.0715***	−0.0069***	−0.0105***	−0.0281***	−0.0193***	−0.0098***
	(0.0839)	(0.0143)	(0.0177)	0 .0193	(0.0150)	(0 .0240)
Observations	327	327	327	327	327	327
Countries	39	39	39	39	39	39
Wald	29.66***	1810***	3571***	2708***	3341***	2455***
Instruments	25	23	28	28	28	28
Hansen P-Value	0.856	0.541	0.172	0.393	0.136	0.254
AR(1)	0.0703	0.105	0.117	0.103	0.103	0.106
AR(2)	0.670	0.360	0.410	0.406	0.381	0.364

Note.s Standard errors in parentheses: *** p < 0.01, ** p < 0.05, * p < 0.1.

Figure A1. Average In-Country Governance Performance in Africa, 2005 – 2020.

Table A1. Correlation matrix for variables used for the analysis.

Variables	ig	igindex	ecoglob	pop	gfcf	vul	hc	cc	ge	va	rl	rq	Ps
ig	1
igindex	0.0758	1
ecoglob	−0.0301	0.231***	1
pop	0.0193	0.409***	0.543***	1
gfcf	0.140**	−0.0325	−0.0624	−0.0519	1
vul	−0.0240	−0.363***	−0.548***	−0.832***	0.0939	1
hc	0.0882	0.123*	0.429***	0.491***	0.0585	−0.445***	1
cc	−0.0794	0.0681	0.457***	0.555***	−0.0480	−0.492***	0.275***	1
ge	−0.136**	0.194***	0.472***	0.645***	−0.104*	−0.586***	0.284***	0.696***	1
va	−0.102	−0.0511	0.433***	0.443***	−0.00267	−0.378***	0.210***	0.562***	0.585***	1
rl	−0.115*	0.136**	0.541***	0.507***	−0.133*	−0.536***	0.294***	0.730***	0.755***	0.614***	1
rq	−0.0977	0.101	0.546***	0.399***	−0.0587	−0.424***	0.184***	0.573***	0.569***	0.608***	0.673***	1
ps	−0.0411	0.145**	0.403***	0.441***	−0.0590	−0.443***	0.214***	0.557***	0.514***	0.611***	0.629***	0.547***	1

Notes. * p < 0.05, ** p < 0.01, *** p < 0.001.

Table A2. List of countries.

Angola	Ethiopia	Mauritius
Benin	Gabon	Mozambique
Botswana	Gambia, The	Namibia
Burkina Faso	Ghana	Niger
Burundi	Guinea	Nigeria
Cabo Verde	Guinea-Bissau	Rwanda
Cameroon	Kenya	Senegal
Central African Republic	Lesotho	Seychelles
Chad	Liberia	Sierra Leone
Comoros	Madagascar	South Africa
Congo, Democratic Republic	Malawi	Sudan
Congo, Republic	Mali	Sao Tome and Principe
Cote d‘Ivoire	Mauritania	Tanzania
Zambia	Uganda	Togo

Anand, R., Mishra, M. S., & Peiris, M. S. J. (2013). Inclusive growth: Measurement and determinants. International Monetary Fund. https://doi.org/10.5089/9781484323212.001

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Data availability statement

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