Catalysts of Economic Welfare in Africa: A Cross-Sectional Autoregressive Distributed Lag Approach

Abstract

This study provides empirical perspectives on the catalysts of economic welfare in Africa, drawing inference from macroeconomic and non-macroeconomic factors. Leveraging a sample of a balanced panel dataset of 35 countries across Africa, this study provides novel applications of the cross-sectional autoregressive distributed lag methodology to economic welfare analysis in Africa. Issues of cross-sectional dependence and slope homogeneity were accounted for whilst establishing causal relationships between economic welfare proxied by the Human Development Index and macroeconomic and non-macroeconomic drivers of welfare. Based on cross-sectional autoregressive distributed lag estimation results, a 1% increase in economic growth was shown to account for a 0.233 percent and 0.253 percent increase in economic welfare in the long run and short run respectively. In addition, technology accounted for a 1.81 percent increase in economic welfare in the long run. The outcome of the Dumitrescu–Hurlin causality test demonstrated causality between trade openness, government effectiveness, economic growth, and economic welfare.