The main claim of this chapter is that political and economic institutions are the root cause of poverty in Sub-Saharan African countries. Therefore, the role of institutions on poverty in the countries of Sub-Saharan African economies is investigated during the period 2002-2019. Voice and accountability, government effectiveness, regulatory quality, and rule of law are institutional measures used in empirical analysis. In addition to these institutional indicators, different instrumental variables are also used to control for endogeneity. Poverty as the dependent variable is measured as the proportion of the population living on less than $1.90 a day. The empirical results, based on the common correlated effects mean group (CCEMG) and augmented mean group (AMG) estimator, suggest that when institutional quality increases, poverty levels decrease in the long run. The policy implication of this chapter is that institutional development should be realized to combat poverty as a precondition for these countries.
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Sub-Saharan Africa is the poorest region in the world (Acemoğlu & Robinson, 2010; Sen, 2000). According to a report published by the World Bank (2020), although extreme poverty rates in this region were slightly lower between 2015 and 2018, it is still as high as 40 per cent. While the number of poor living in Sub-Saharan Africa was 416 million in 2015, this number reached 433 million in 2018 (World Bank, 2020: 28). Even though extreme poverty is widespread throughout the region, almost half of these 433 million poor people are concentrated in five economies. The number of poor people is 79 million in Nigeria, 60 million in the Democratic Republic of Congo, 28 million in Tanzania, 26 million in Ethiopia and 20 million in Madagascar (Schoch & Lakner, 2020; World Bank, 2020). The concentration of high poverty rates reveals the image of a poverty belt stretching from Senegal to Ethiopia and from Mali to Madagascar. The poverty rate is above 10% in 38 out of 44 economies in the region. More dramatically, half of these 44 countries have poverty rates above 35%, and eighteen of the 20 countries with the highest poverty rate in the global economy are in Sub-Saharan Africa (World Bank, 2020: 46). The situation becomes more dramatic when an assessment is made based on measures of capability deprivation (education, health, political participation, etc.) instead of income poverty (Sen, 2000).
The gains in global poverty reverse with the impact of COVID-19 (World Bank, 2020), and extreme poverty is expected to become a sub-Saharan African phenomenon in the next ten years. Therefore, Sub-Saharan countries are expected to host most of the poor in 2030 (Schoch & Lakner, 2020). Although different reasons such as fragility and conflict (World Bank, 2020: 47), ethnic division (Easterly & Levine, 1997), geographical factors such as lack of openness to international markets, lack of sea access, tropical climate (Sachs & Warner, 1997), social norms (Platteau, 2000) are emphasized, Acemoğlu and Robinson (2010) argue that poverty in these countries can be explained by political and economic institutions. The emergence of these political and economic institutions arose due to the interaction of early institutions in the region with colonialism in the 19th and 20th centuries. Accordingly, existing institutions do not provide economic and political incentives. First of all, property rights are not guaranteed and not effectively organized. Therefore, markets do not function effectively, and production resources are misallocated. States in these countries are weak and do not provide a regulatory environment for firms (Acemoğlu & Robinson, 2010: 22).