The Relationship between Democratic Governance, Finance and Economic Disparities in Selected African Countries

Abstract

The study investigates the relationship between democratic governance; finance and economic disparities in African economies in a system-Generalised Method of Moments (sys-GMM) framework. The study gathers relevant data from 41 democratic African countries from 2001 to 2020. The study finds that, the previous economic disparities determine the current economic inequalities in all the models adopted.  The empirical findings from the study reveals that economic disparities are wide among African countries and government finances has insignificant increased the effect of unequal economic benefits. Also, the study discovers that, the nexus between the rule of law and economic disparities among the African people is positive and statistically significant at 10 percent. The study also finds that, the interactive terms of finance and democratic governance has an increasing effect on economic disparities in African countries. By implication, given a democratic governance index, an increase in government finance would further worsen economic disparities in Africa. The study recommends for re-evaluation and re-assessment of the quality of governance in Africa before policies formulation towards addressing economic disparities. The study therefore, advocates for a strong institutional quality for African countries before the policy formulation that is geared towards the realisation of a reduced unequal economic benefits in Africa.