The impact of governance on economic growth in selected East African countries for the period 1996 to 2016

Abstract

Different empirical studies show that not all countries that have good governance have performed well in economic growth. Some with bad quality governance like corruption, poor democracy have actually shown good economic performances. Is East Africa gaining much from all the huge resources it has put in promoting governance is the question that this study there sought to give the answer. We examine the impact of governance on the economic growth of EAC countries more specifically, scrutinize the effects of the six World Governance Indicators which are computed by World Bank namely: Voice and Accountability, Political Stability, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption together with Social and Macroeconomic factors that affect economic growth in the region. The study utilized the panel data obtained from the five countries Burundi, Kenya, Rwanda,Tanzania and Uganda for the period 1996 - 2016. Panel data technique was used to estimate the model where the random effect model was appropriate and the study used GLS model to run the regression to mitigate violation of any classical assumptions. The findings revealed that among the governance indicators proposed; control off Corruption, Government effectiveness, and regulatory quality have a positive and significant impact on growth. On the other hand trade openness wasfound to be positively and significantly related to the Economic Growth in EAC countries while inflation was found to be negatively affecting the economy. The main policy implication is that EAC governments should continue to fund governance initiatives as they have a strong positive impact on growth and improve on inventions to control corruption through increasing salaries of public servants give that EAC is still developing.