Inclusive Growth in Africa: Do Democracy and Regime Sustainability Matter?

ABSTRACT Institutional quality in Africa has evolved over the last two decades, fuelling an extremely fertile literature. In this article, we examine the effects of democracy and regime sustainability on inclusive growth. Based on a sample of 48 African countries, we specify and estimate a panel data model by Ordinary Least Squares (OLS) and the Driscoll–Kraay method, whose robustness is confirmed via the Lewbel 2SLS method, and a dynamic panel data model proved by the System Generalized Method of Moments (S‐GMM) over the period 1995–2020. Our results show that democracy and regime sustainability significantly and statistically improve inclusive growth in Africa. The robustness of these results is confirmed by taking into account governance indicators and the homogenization of resource‐poor countries. However, regime sustainability and democracy significantly reduce inclusive growth in resource‐rich countries. Plausible explanations for the contradictory results lie in the curse of natural resources and the rentier behavior of certain political leaders, which complicate the structural transformation of natural endowments. We suggest an institutional optimisation by consolidating the institutional environment through the establishment of economic and political rules.