Governance and economic growth in East African Community Countries

Abstract

It is evident that good governance encourages investment which enhances growth as well as influencing other development conditions like poverty and inequality reduction. This study sought to explore the relationship between governance and economic growth in East Africa Community (EAC) countries. In particular, the study investigated the effects of the six World Governance Indicators which are computed by World Bank namely: Voice and Accountability,Political Stability, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption together with Social and Macroeconomic factors that affect economic growth in the region.The study utilized the panel data obtained from the five countries Burundi, Kenya, Rwanda,Tanzania and Uganda for the period 1999 - 2012. The study used the Random Effects Estimation technique after the Hausman test results preferred the random effect model. The results revealed that among the governance indicators proposed; Political Stability, Quality Regulatory and Control of Corruption were significant. Political Stability and Quality Regulatory were negatively related to Economic Growth Rate while Control of Corruption was positively related to economic growth rate. On the other hand, Population Growth Rate and Inflation Rates were both found to be negatively and significantly related to the Economic Growth rate in EAC countries.