DP15651 Quality of sub-national government and regional development in Africa

Author(s): Yohan Iddawela, Neil Lee, Andrés Rodríguez-Pose
Publication Date: January 2021
Keyword(s): Africa, Decentralisation, institutions, quality of government, regions
JEL(s): E02, N97, O43
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15651

Despite widespread interest in government quality and economic development, the role of sub-national government has been largely overlooked. This represents an omission in Africa, given ongoing processes of devolution in much of the continent. In this article, we consider the impact of sub-national government institutions on economic development in 356 regions across 22 African countries. We create a novel index of sub-national government quality based on large-scale survey data and assess its impact on regional economies using satellite data on night light luminosity. To address causality concerns, we instrument sub-national government quality with data from pre-colonial societies. Our results show a positive and significant relationship between sub-national government quality and regional economic development, even when controlling for the quality of national level institutions. Better sub-national governments are a powerful but often overlooked determinant of development in Africa.