Governance and income determinants of poverty reduction: A cross-country analysis of Sub-Saharan African countries

Abstract

This paper using cross-sectional data on 39 Sub-Saharan African countries examines how political and economic governance affect the most recent data on poverty for the period of 2000-2007. For this period, the paper finds that the average percentages of population living on less than $1.25 a day and on less than $2.00 a day are 50 and 70, respectively in Sub-Saharan Africa. It finds that these percentages can be reduced by a half in 12.5 years and 28 years, respectively if the real per capita gross domestic product (GDP) grows sustainably at 5% per annum. Whereas, at a real per capita GDP growth rate of 7% per annum, the percentages can be reduced by half in 9 and 20 years, respectively. Government expenditures are found irrelevant to the poverty reduction. Similarly, high literacy rates are not found to trickle down to any significant poverty reductions. The political governance variables used in the paper are all found not to contribute towards poverty reductions. The paper confirms strongly that real per capita GDP is what matters most to poverty reductions in Sub-Saharan Africa.