DRIVERS OF ECONOMIC PROSPERITY IN SUB-SAHARAN AFRICA: EMPIRICAL CONSIDERATIONS OF INSTITUTIONS, INVESTMENT, AND MACROECONOMIC POLICY

Abstract

The primacy of economic prosperity as the catalyst, predictor, and moderator of success in other realms of life has justified the disproportionate attention given to it by development scholars and practitioners. This study explores the key drivers of economic prosperity in Sub-Saharan Africa (SSA), emphasising the influence of institutional quality, investment, and macroeconomic policy. Using a panel data set from 2000 to 2024, and the two-step system Generalized Method of Moments (GMM) estimator, the analysis controls endogeneity and unobserved heterogeneity, with diagnostic tests confirming model validity. Results reveal strong growth persistence, indicating that past prosperity reinforces future performance. Foreign direct investment significantly promotes prosperity, while government spending impedes it, reflecting fiscal inefficiencies and governance gaps. Institutional quality shows a positive but insignificant effect, and weak institutions amplify fiscal mismanagement. Inflation exhibits a weak positive association, whereas life expectancy negatively relates to prosperity, likely due to demographic pressures. The findings highlight the importance of prudent fiscal management, institutional strengthening, and policies that attract productive investment while addressing structural and demographic constraints to achieve sustained economic advancement across SSA.