Does legal capacity matter for inclusive economic development? Empirical evidence from Southern Africa
Keywords:
economic development, legal capacity, aid, neopatrimonialism, SADC
Abstract
The legal capacity or, otherwise, the institutions of rule of law (RL), have become a key factor for inclusive economic development, but the main strands of the literature involve theoretically driven expectations. Therefore, the study sought to examine the impact of legal capacity on inclusive economic development in the Southern African Development Community (SADC) region. While extant studies focused on the effect of governance on national output, the present study goes beyond growth by including welfare indicators. The study employed a panel autoregressive distributed lag (ARDL) approach for data from all 16 SADC member states from 1996 to 2019. The interpretation of results and policy implications are based on the outcomes of the pooled mean group (PMG) estimator, which was deemed by the Hausman test as the best and most efficient estimator over the MG and the DFE family of the ARDL panel estimators. The results of the restricted panel reveal that strengthening the institutions of the RL leads to an improvement in inclusive economic development among SADC states. Therefore, we argue that trade laws should be domestically integrated and embedded in SADC’s national laws, and that common courts should be set to adjudicate disagreements over compliance. We also propose that SADC introduce incentives to increase legal stakeholders' participation across the region.
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References
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Murtaza, G., & Farid, M.Z. (2016). Economic institutions and growth nexus: The role of governance and Democratic Institutions. Evidence from Time-Varying Parameters' (TVPs) Models. The Pakistan Development Review, 55(4), 675-688.
Naidu, M. V. (2002). Security, Sovereignty, And Intervention: Concepts and Case Studies. Peace Research, 34(1), 3-58. http://www.jstor.org/stable/23608020
Ndulu, B.J & O'Connel, S.A. (1999). Governance and Growth in Sub-Saharan Africa. Journal of Economic Perspectives, 13(3), 41-66. https://works.swarthmore.edu/fac.economics/51
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Zouhair, A. (2019). The impact of governance on poverty reduction: Are there regional differences in Sub-Saharan Africa? MPRA working paper No. 94716. https://mpra.ub.uni-muenchen.de/94716/
Afolabi, J.O. (2019). The impact of governance on economic development in West Africa. A system GMM dynamic panel approach. Acta universitatis Danabus. OEconomica, 15(3).
African Unio,. (2015). The Africa we want. https://au.int/sites/default/files/documents/33126-doc-01_background_note.pdf
Aligica, P. D., Boettke, P. J., & Tarko, V. (2019). Pubic Governance and the Classical-Liberal Perspective [Oxford University Press]. https://doi.org/10.1093/oso/9780190267032.001.0001.
Bach, D., & Gazibo, M. (Eds.). (2011). Neopatrimonialism in Africa and Beyond (1st ed.). Routledge.
Banda, L.G. (2023a). Good Governance and Human Welfare Development in Malawi. An ARDL Approach. Malawi Journal of Social Sciences, 22, 88-119. https://dx.doi.org/10.2139/ssrn.4235681
Banda, L.G. (2023b). State Capacity and Growth in Sub-Saharan Africa: A Dynamic Panel Examination of Smith’s Pillars of Prosperity. IAPSS Academic Convention 2023 on “State Responsibility: Fourth Industrial Revolution, Sustainability and Good Governance”. https://ssrn.com/abstract=4598989
Bardhan, P. (2016). State and Development: The Need for a Reappraisal of the Current Literature. Journal of Economic Literature 54(3), 862-92. https://www.jstor.org/stable/43932478
Cammack D., Golooba-Mutebi F., Kanyongolo F., O'Neil T. (2007). Neopatrimonial Politics, Decentralisation and Local Government: Uganda and Malawi. Overseas Development Institute [ODI].
Cammack, D., & Kelsall, T. (2011). Neo‐patrimonialism, Institutions and Economic Growth: The Case of Malawi, 1964 2009. IDS Bulletin, 42, 88-96. 10.1111/j.1759-5436.2011.00214.x.
De Hoyos, R., & Sarafidis, V. (2006). Testing for Cross-Sectional Dependence in Panel Data Models. The Stata Journal, 6(4), 482-496.
Dollar, D., & Kraay, A., (2002). Growth is Good for the Poor. Journal of Economic Growth, 7(3), 195-225.
Dzionek-Kozłowska, J. & Matera, R. (2021). Which institutions are really needed to achieve wealth? a clarification of Acemoglu and Robinson's concept. Historyka. Studia Metodologiczne, 50, 377-395. 10.24425/hsm.2020.134810.
Earl, L. & Scott, Z. (2009). Assessing the evidence of the impact of governance on development outcomes and poverty reduction. GSDRC. UOB.
Ekpo, A.H. (2020). Governance, Growth and Development in Sub-Saharan Africa: A Revisit of the Evidence. AEA/NEA/AFEA Conference.
Ellet, R. (2014). Politics of judicial independence in Malawi. Blantyre. Freedom House.
Fayisa, B., & Nsiah, C. (2013). The impact of governance on economic growth in Africa. The Journal of Developing Areas, 7(1), 91 108. http://www.jstor.org/stable/23612261.
Francisco, A.H. (2020). Neopatrimonialism in the Contemporary African Politics. E-International Relations. https://www.e-ir.infor/2010/01/24/
Frediani, A. (2010). Sen's Capability Approach as a framework to the practice of development. Development in Practice, 20(2), 17-187. http://www.jstor.org/stable/27806685
Glopen, S. & Kanyongolo, F.E. (2007). Courts and the poor in Malawi: Economic Marginalization. Vulnerability and the law. Symposium 5(2), 258-293. Doi:10.1093/icon/mom002
Grindle, M.S. (2007). Good enough governance revisited. Development Policy R View, 25(5), 553-574.
Gujarati, D. (2004). Basic Econometrics (4th ed.). The McGraw-Hill Companies
Hammer, P. J. (2000). Antitrust beyond Competition: Market Failures, Total Welfare, and the Challenge of Intramarket Second-Best Tradeoff. Michigan Law Review, 98(4), 84 -925. https://doi.org/10.2307/1290334
Huynh, K.P., & Jacho-Chávez, D.T. (2009). Growth and governance: A nonparametric analysis. Journal of Comparative Economics, 37(1), pp.121-143.
IDLO. (2020). Goal 16: Peace, Justice and Strong Institutions. https://www.idlo.int/sustainable-development-goals/goal-16-peace-justice-and-strong-institutions#
Iheonu, C.O., & Nwachukwu, T. (2020). Macroeconomic determinants of Household Consumption in selected West African countries, AGDI Working Paper, No. WP/20/031, African Governance and Development Institute (AGDI), Yaoundé. https://www.econstor.eu/bitstream/10419/228013/1/1700662511.pdf
Iorember, P. T., Gbaka, S., Jelilov, G., Alymkulova, N., & Usman, O. (2022). Impact of international trade energy consumption and income on environmental degradation in Africa's OPEC member countries. African Development Review, 34, 175-187. https://doi.org/10.1111/1467-8268.12629
Irwin, D.A. (2014). Adam Smith's "Tolerable Administration of Justice" and the Wealth of Na ions. Massachusetts, National Bureau of Economic Research. Working Paper 20636. http://www.nber.org/papers/w20636
Kaufmann, D. Kraay, A., & Mastruzzi, M. (2010). "The Worldwide Governance Indicators: A Summary of Methodology, Data and Analytical Issues". World Bank Policy Research Working Paper No. 5430. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682130
Kelsall, T. (2011). Rethinking the Relationship between Neo-patrimonialism and Economic Development in Africa. Institute of Development St dies. 2(2). Pp. 79-84
Kurtz, M.J., & Schrank. (2007). Growth and governance: Models, measures, and mechanisms. Journal of Politics, 69, 538-54.
Laberge, M. (2019). Is Africa measuring up to its Goal 16 comments? The Road to HLPF 2019 and B ond. United National Development Programme (UNDP) and South African Institute of International Affairs (S IIA). https://media.africaportal.org/documents/Special-Report_SDG16_FINAL.pdf
Leeson, P.T.(2017). WTF?!: An Economic Tour of the Weird. Stanford University Press.
Liu, J., Tang, J., Zhou, B & Liang, Z. (2018). The effect of governance quality on economic growth: Based on China’s provincial panel data. Economics Journal, 6(4), 54.
Matola, J.U. (2014). Aid, Investment, and Growth in Southern Africa. KDI School of Public Policy and Management.
Minoiu, C., & Reddy, S. (2010). Development Aid and Economic Growth: A Positive Long-Run Relation. The Quarterly Review of Economics and Finance, 50, 27-39. 10.1016/j.qref.2009.10.004.
Mkandawire, T. (2015). Neopatrimonialism and the political economy of economic performance in Africa: Critical Reflections. World Politics, 67(3), 563-612. http://www.jstor.org/stable/24578352
Mkandawire, T., (2007). Good Governance: The Itinerary of an Idea. Development in Practice, 17(4-5), 679-81.
Murtaza, G., & Farid, M.Z. (2016). Economic institutions and growth nexus: The role of governance and Democratic Institutions. Evidence from Time-Varying Parameters' (TVPs) Models. The Pakistan Development Review, 55(4), 675-688.
Naidu, M. V. (2002). Security, Sovereignty, And Intervention: Concepts and Case Studies. Peace Research, 34(1), 3-58. http://www.jstor.org/stable/23608020
Ndulu, B.J & O'Connel, S.A. (1999). Governance and Growth in Sub-Saharan Africa. Journal of Economic Perspectives, 13(3), 41-66. https://works.swarthmore.edu/fac.economics/51
Noha, E & I-Ming Chiu. (2016). The Impact of Governance on Economic Growth: The case of Middle Eastern and North African Countries. Topics in Middle Eastern and African Economies, 18(1), 126-144.
North, D.C. (1990). Institutions, Institutional Change and Economic Performance [Cambridge University Press]. https://www.cambridge.org/core/product/identifier/9780511808678/type/book.
Olson, Mancur, Jr., Naveen Sarna, and Anand V. Swamy. (2000). Governance and growth: A simple hypothesis explaining cross-country differences in productivity growth. Public Choice, 102, 341-64.
Pesaran, H., & Smith, R. (1995). Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics, 68(1), 79-113. 10.1016/0304-4076(94)01644-F.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94, 62 -634. doi:10.1080/01621459.1999.10474156
Robeyns, I., & Byskov, M. (2020). The capability approach. In E. N. Zalta (Ed.), The Stanford encyclopedia (Fall 2021 ed.). Stanford University.
Robinson, J.A., & Acemoglu, D. (2012). Why nations fail: The origins of power, prosperity and poverty (pp. 4-47). Profile.
SADC. (2020). The Regional Indicative Strategic Development Plan (RISDP) 2020-2030 Blueprint. SADC Secretariat. https://www.sadc.int/about-sadc/overview/
Samarasinghe, T. (2018). Impact of Governance on Economic Growth. MPRA Paper 89834. University Library of Munich.
Sebastian G., Stephen K., & Lixin C.X., & Ben Z. (2017). The effect of aid on growth: evidence from a Quasi-experiment. Journal of Economic Growth, Springer, 22(1), 1-33.
Setayesh, M.H, and Abbas A.D. (2017). Good governance, innovation, economic growth and the stock market turnover rate. The Journal of International Trade & Economic Development, 26, 829-50.
Stewart, D. (1976). Adam Smith on the Need for ‘Peace, Easy Taxes, and a Tolerable Administration of Justice’ (1755)No Title. An Inquiry Into the Nature and Causes of the Wealth of Nations (Cannan ed.).
Tohidi, S. (2019). "Peace, Easy Taxes, and a Tolerable Administration of Justice": Institutional Influences on SME Innovation in Developing Countries [Master’s thesis, University of Ottawa]. https://ruor.uottawa.ca/bitstream/10393/43226/1/Tohidi_Sevda_2019_Thesis.pdf
UNDP. (2016). Sustainable Development Goals. https://www.undp.org/content/dam/undp/library/corporate/brochure/SDGs_Booklet_Web_En.pdf
Walker, M., & Unterhalter, E. (2007). Amartya Sen's Capability Approach and Social justice in Education. Macmillan.
World Bank. (2020). Worldwide governance indicators. https://info.worldbank.org/governance/wgi/
World Bank. (2021). Net official development assistance and official aid received (current US$). https://data.worldbank.org/indicator/DT.ODA.ALLD.CD
World Justice Project. (2021). World justice project: Rule of Law Index 2021. https://www.gob.mx/cms/uploads/attachment/file/704367/wjp-index-21.pdf
Zardoub, A. (2020). Exploring the links between financial flows and economic growth: A panel ARDL Approach. PSU Research Review.
Zouhair, A. (2019). The impact of governance on poverty reduction: Are there regional differences in Sub-Saharan Africa? MPRA working paper No. 94716. https://mpra.ub.uni-muenchen.de/94716/
Published
2024-02-27
How to Cite
George Banda, L. (2024). Does legal capacity matter for inclusive economic development? Empirical evidence from Southern Africa. Ius Humani. Law Journal, 13(1), 131-152. https://doi.org/https://doi.org/10.31207/ih.v13i1.347
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