Institutions and Economic Growth: Evidence from Ecowas

Abstract

This study examines institutions and economic growth: evidence from ECOWAS for 2000-2018. We use eight alternative variables to evaluate institutions and economic growth: gross domestic product, gross fixed capital formation, population growth, and foreign direct investment, control of corruption, government effectiveness, political stability & absence of violence/terrorism, and rule and law. Then, we adopted the combined OLS model, the fixed effects model, the random effects model, the difference-GMM, and the system-GMM model. The results show that different measures of institutional indicators significantly impact the economic growth of ECOWAS. However, the institution’s quality has nothing to do with the financial results expected by ECOWAS. In most cases, foreign direct investment, gross fixed capital formation, and population growth positively impact the economic development of ECOWAS, while political stability, rule and law, control of corruption, and effectiveness of government harm the economic growth of ECOWAS. Therefore, decision-makers and competent authorities should reduce the organization’s quality through appropriate development strategies such as derivatives.