Institutional Reforms and Economic Growth Performance in Nigeria.
Abstract
This study makes an empirical case that the level of sensitivity of economic growth to political and economic institutional reforms in Nigeria matters for sustained and sustainable economic performance both in the short, medium and long term.
We first document the empirical evidence that successive regimes in Nigeria were indifferent to the impact of institutional reforms on economic growth.
Several regimes both military and civilian pursued time bound and ambitious economic goals without regard to the effect of political institutional reforms.
Secondly, the sequencing of policies were not considered necessary and therefore political and economic policies could be started and dropped regardless of their causal relationships with economic growth projections.
Our basic framework was to use Extreme Bound Analysis (EBA) to ascertain the sensitivity of economic growth to political and economic institutional reform variables. In the results we found that economic growth was more sensitive to political than economic institutional reforms or lack of it.
Our result exposes the inadequacy of the mindset of most regimes in Nigeria that economic growth will be achieved without regard to political or economic institutional reforms.
In policy sequencing we used the Granger Causality Tests to ascertain that while economic institutional reforms is unidirectional to economic performance, political institutional reforms are bi-directional,ie there is a feedback causation from political reforms to economic growth.
Table Of Contents
Title Page……………………………. ii
Approval Page………………………… iii
Dedication…………………………….. iv
Acknowledgements………………. v
Table of Contents………………….. vi
List of Tables…………………. vii
List of Figures…………… viii
Abstract………………. ix
CHAPTER ONE INTRODUCTION
- Background……………….. 1
- Statement Of Problem…………….. 4
- Study Hypothesis……………………. 9
- Objectives Of The Study……………….. 9
- Scope of the Study…………….. 9
CHAPTER TWO REVIEW OF LITERATURE
THEORETICAL FRAMEWORK
- Theories Of Institutions And Growth………………….. 10
- Transaction Cost Economics…………………. 10
- New Classical Convergence Theory……………. 11
- The Conceptual Framework………. 12
THEORETICAL LITERATURE
- The Basic Theoretical Model………………… 16
- Modeling the impact of institutions…………….. 16
- Relevance of Institutional theory on Growth……………… 23
- Political Institutions and Growth……………. 24
- Political Regimes and Growth……………….. 25
- Economic Instituions and Growth 25
- Neo-Classical Growth Convergence hypotheses…………….. 28
- Institutions And Growth Convergence………… 29
- The Causal Relationships………………. 31
- EMPIRICAL LITERATURE……………. 32
CHAPTER THREE
- Institutional Reform Experience in Nigeria………………. 37
- Institutional Reforms in Nigeria: Some stylized facts……………. 37
CHAPTER FOUR METHODOLOGY AND MODEL SPECIFICATION
- Overview……………………. 45
- Growth Regressions And Robust Specifications……….. 45
- The Sensitivity Analysis ( EBA)………………. 46
- The Causality Tests…………………….. 48
- Data Sources…………………………. 49
- Model Justification………………. 49
CHAPTER FIVE DATA GENERATING PROCESS, DESCRIPTIVE STATISTICS, AND DIAGNOSTIC TESTS
- Data graphing and Assessment of time series characteristics………… 52
- Descriptive Statistics…………………………….. 55
- Diagnostic Tests………………………. 57
- Johansens Cointergration Tests………………… 61
CHAPTER SIX EVALUATION AND INTERPRETATION OF RESEARCH RESULTS
- Growth Regressions And Robust Specification… 63
- Sensitivity Tests: Extreme Bound Analysis ( EBA). 65
- 2 Causality Test Results………… 66
CHAPTER SEVEN SUMMARY AND CONCLUSION…..73
7.1 Summary……………79
7.2 policy implications……………..79
7.3 Conclusion………..81
References…………………83
Appendixes…………. 99
Introduction
Background of Study
The role of institutions in promoting growth has motivated interest in the study of the nexus between growth and institutions in recent years ( World Bank, 1993a, Stiglitz, 1998).
The debate so far focuses on whether the quality of public and private economic institutions, depth of political participation among the populace, improvement in structures of governance, and the extent of social capital ( or civic engagement) affect growth.
The intuition, therefore, is that if there is clear evidence that weak political and economic institutions significantly hamper growth, policy makers might propose measures to strengthen institutions in particular ways,
and sequence policies in a manner that will encourage appropriate political and economic institutions to optimally impact on growth and development (Aron, 1996).
The sequence of political democratization and economic liberalization has been under a great deal of scrutiny since the end of The Cold War.
Two paradigms in the literature are instructive: first, the former Soviet Union, where political democratization was launched without first engaging economic reforms, and second,
Peoples Republic of China, where economic liberalization has registered great success without substantial political reforms.
While some scholars contend that political freedom is a prerequisite for economic prosperity and growth, others maintain that strong political authorities (dictators) capable of effectively relocating resources are required for developing countries to experience rapid economic growth ( Sirowy and Inkeles, 1990).
References
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Alesina, Alberto. Sule Ozler, Nouriel Roubini, and Philip Swagel ( 1966) “ Political Instability and economic Growth “ Journal of Economic Growth 1: 189-212 Alverez , M. J., A. Cheibub, F. Limonge, and
A. Prezeworski ( 2000) “ Democracy and Development: Political Institutions and Material Wellbeing in the World, 1950-1990. Cambridge: Cambridge University Press.
Ali, A. and W. Mark Crain (2002)” Institutional Distortions, Economic Freedom, and Growth” Cato Journal, Vol. 21 No. 3
Amuwo, K. Adigun, A. Suberu, R. and Herault G. ( 1998) Federalism and Political Restructuring in Nigeria. ed. Spectrum Books Ltd, Ibadan, Nigeria.