Construction institutions and economic growth in sub-Saharan Africa

Abstract

The construction sector in developing countries has propelled economic growth in the most recent period, yet  analysis of growth performance has failed to take this into account. This article is a comparative analysis of the  relationship between the construction sector and aggregate output for a panel of sub-Saharan African countries  using a panel generalized methods of moments (GMM). After accounting for the effects of institutional set up, cross sectional heterogeneity and non-linearity, our results revealed that the construction sector affects growth positively  and most importantly, developing the right institutions could further enhance this impact. The intrinsically non-linear relationship between the construction and output growth is very mute in our sample, suggesting that, sub-Saharan  African countries have not yet reached the stage of development where construction growth becomes trivial. We  further show that East Africa experienced a robust impact of construction on economic growth compared to West and Southern Africa.

Keywords: Construction; Output growth; Institutions;  Endogeneity.