Economic Growth or Good Governance: What is More Important to Reduce Poverty and Insecurity in Sub-Saharan Africa?AMM QUAMRUZZAMAN, MCGILL UNIVERSITYPRESENTATION PREPARED FOR THE CSA CONGRESS 2015, OTTAWA

JUNE 5, 2015

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BackgroundThe first of the eight MDGs – halve the proportion of people living below the income of less than $1 a day by 2015.47% of the people in SSA live below $1.25 a day and more than two thirds live on less than $2 a day. Measured in terms of income alone, SSA is the only region where poverty has increased since 1990.SSA is also one of the most vulnerable regions in the world in terms of citizen insecurity measured using homicide rate.

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BackgroundPoverty and insecurity are arguably the two most pressing development challenges facing sub-Saharan Africa. Policy response 1: national policies, supported by western donors, with a focus on promoting good governance. Policy response 2: economic policies with a primary focus on promoting sustainable economic growth. This paper evaluates the relative importance of good governance and economic growth in reducing poverty and insecurity in SSA.

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Data and MethodsDrawbacks of income-based poverty measures and homicide rate-based insecurity measures.Afrobarometer Lived Poverty Index and Insecurity Index.Afrobarometer governance indicators, WGI and WDI.Cross-sectional data – 30 countries, longitudinal data – 16 countries over the period 2002-2013.Individual-level and country-level hierarchical data structure: mixed method (xtmixed command of Stata 13).

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Variables and MeasurementLPI: How frequently people ‘involuntarily’ go without basic necessities such as enough food, clean water, medicine or medical treatment, cooking fuel, and a cash income. 0 = never, 1 = just once or twice, 2 = several times, 3 = many times, and 4= always during the course of a year. Combined these responses using exploratory factor analysis (EFA) and using the principal factor to obtain the LPI scores, with higher scores corresponding to greater extent of lived poverty.

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Variables and Measurement…LII: Following the same EFA method, combined the responses to how frequently people feared crime in the neighborhood, were physically attacked by someone, and something was stolen from their house during a year.Economic growth: Annual percentage growth rate of GDP per capita in constant 2005 US dollars. Also 4 dummies for income levels based on GDP per capita, PPP adjusted, in 2011 int’l dollars: < $4000, $4001 - $8000, $8001 - $12000, and > $12000, with < $4000 as ref.

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Variables and Measurement…Good governance: Bribe, government performance, lack of rule of law, satisfaction with democracy, service provisioningWGIs – rule of law, control of corruption, government effectiveness (-2.5 to 2.5); FH – extent of democracy (0-10).Control variables: education, employment status, area of residence, if left party in power, log of refugee population by country of asylum, and ethnolinguistic fractionalization.Regions (Western and Eastern Africa, with Southern Africa as the reference category) and survey years (for panel data).

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Results (using Afrobarometer indicators) Cross-sectional analysis Longitudinal analysis

Variable Poverty Insecurity Poverty Insecurity

Economic growth -0.045*** 0.006 -0.027*** -0.008

Level of income: $4001-8000 -0.334** 0.110 -0.021 -0.083*

Level of income: $8001-12000 -0.591** -0.493** 0.277** -0.303***

Level of income: $12000 up -0.616*** 0.015 0.550*** -0.137

Bribe/corruption 0.081*** 0.141*** 0.083*** 0.159***

Lack of rule of law 0.060*** 0.047*** 0.052*** 0.046***

Government performance -0.081*** -0.071*** -0.083*** -0.052***

Satisfaction with democracy -0.125*** -0.061** -0.108*** -0.025

Service provisioning -0.144*** -0.015 -0.144*** 0.007

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Results (using WGIs) Cross-sectional analysis Longitudinal analysis

Variable Poverty Insecurity Poverty Insecurity

Extent of democracy -0.075** -0.041** -0.148* 0.036

Control of corruption -0.424*** -0.058 -0.258 -0.029

Rule of law -0.350*** -0.066 -0.326 -0.182

Government effectiveness -0.444*** -0.127* -0.350* -0.282

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ConclusionEconomic growth has significant effects on poverty reduction but not on insecurity reduction.Good governance has more potential to reduce both poverty and insecurity in SSA.Economic growth needs to sustain to have a significant effect on poverty reduction.Strong institutions are a prerequisite for a sustainable economic growth, to raise the capacity of the poor, and to ensure security.Economic growth needs to be transformative and redistributive (to create more jobs and income equality, for effective service delivery).