Genuine Wealth Per Capita as a Measure of Sustainability and the Negative Impact of Corruption on Sustainable Growth in Sub‐Sahara Africa

• Author: Joseph Ato Forson,Ponlapat Buracom,Guojin Chen,Theresa Yaaba Baah‐Ennumh
• DOI: http://doi.org/10.1111/saje.12152
• Date: 01 June 2017
• Published date: 01 June 2017

GENUINE WEALTH PER CAPITA AS A MEASURE OF

SUSTAINABILITY AND THE NEGATIVE IMPACT OF

CORRUPTION ON SUSTAINABLE GROWTH IN

SUB-SAHARA AFRICA

JOSEPH ATO FORSON*

†

,PONLAPAT BURACOM

†

,GUOJIN CHEN

‡

AND THERESA YAABA BAAH-ENNUMH

§

Abstract

In this paper, we argue that the answer to the question of whether the impact of corruption on

development is homogenous, is no. Our optimism rest on how development may be conceptual-

ised. When equated to a narrow measure in economic-wise which fundamentally ignores critical

issues, then there is a possibility the outlook could be positive. But when conceptualised using a

broad-based approach such as sustainable development, then the outlook could be negative. We

assess a panel of 22 economies in Sub-Sahara Africa with the most recent dataset (1996–2013)

from the World Bank and other reputable agencies. Our finding is quite robust. It holds in

pooled OLS, Fixed effects and GMM within IV settings; and it also holds for different measures

of institutions and different measures of development using growth per capita GDP and genuine

wealth per capita, respectively. Taking stock of major policy blue-prints of selected countries in

the region on the fight against corruption, we are able to point out that institutions play impor-

tant role in insulating citizens against the devastation caused by corruption. Overall, through this

comparison, we are able to signal that both incidental and systematic corruption poses a long-

term threat to sustainable development.

JEL Classification: D72, D73, D78

Keywords: Corruption, sustainable growth, Sub-Sahara Africa, institutions, governance

* Corresponding author: Doctoral Research Candidate, National Institute of Development

Administration (NIDA) Graduate School of Public Administration, Thailand. Tel: 166-

840724426. E-mail: datoeagle@yahoo.com

†

Graduate School of Public Administration, National Institute of Development Administra-

tion (NIDA), Thailand.

‡

Wang Yanan Institute for Studies in Economics (WISE), Xiamen University, China.

§

Department of Planning, Kwame Nkrumah University of Science and Technology (KNUST),

Ghana.

A preliminary version of this article was presented at a conference in Bangkok, Thailand on

Public Administration and Sufficiency Economy Philosophy, organized to commemorate the

60th anniversary of the Graduate School of Public Administration (NIDA). The correspond-

ing author wishes to thank Prof. Ponlapat Buracom, who was his dissertation supervisor. His

insightful comments, direction and encouragement was key to the corresponding author’s suc-

cessful completion of his doctoral research. This article is a section of the empirical part of

the said research. The authors further thank Steve Koch (the editor) and the numerous anon-

ymous reviewers for their invaluable comments. Any remaining errors are that of the authors’.

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C2017 Economic Society of South Africa. doi: 10.1111/saje.12152

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of Economics

1. INTRODUCTION

Contemporary works on the devastating effects of corruption have mainly been explored

in relation to economic development at the macro and micro levels (see Mauro, 1995;

Bardhan, 1997; Mo, 2001; Sharma, 2007; Pellegrini, 2011; Saha and Mallik, 2012;

Ugur, 2014; Forson et al., 2015), ignoring issues that pertain to sustainability. As a con-

sequence, resource-rich economies are increasingly at risk of losing out through over

exploitation. It is a well-established fact that Sub-Sahara Africa (SSA) is blessed with

diverse natural resources and thus has often been described as the resource basket of the

world. Yet it is the continent housed to over two-thirds of the world’s poorest (Oxfam,

2014). A preliminary report to assess performance of countries in meeting the Millen-

nium Development Goals (MDGs) have shown that most countries in the region might

not be able to meet the set targets (UN- MDG, 2013). That notwithstanding, donor

supports to extricate the continent from the doldrums of poverty has been unprece-

dented. A recent report suggest that even though there has been a significant drop in

development assistance by 16% from the Organization for Economic Cooperation and

Development to least developed economies, the fraction of foreign aid was close to a

record peak after donors were reported to have spent a staggering $135 billion in 2014

(see Anderson, 2015).

With the link between foreign aid inflows and development in the region being so

fuzzy, it has generated another discourse laden with a conjecture that the plight of Africa

may be as a result of the continued inflows of aid undercut by all forms of corruption

(see Ohler et al., 2012; Knack, 2013; Forson et al., 2015). Thus, corruption regardless of

its form and magnitude is generally devastating and inimical to well-being. Yet the bane

can be mitigated when government machinery is reinvented through institutional

reforms and effective policy decisions (Osborne and Gaebler, 1992; Forson et al., 2016).

It should be pointed out that until Ugur’s comprehensive meta-analysis on this linkage

(see Ugur, 2014), it was thought the corruption-development relationship have always

supported the notion of promoting growth (Leff, 1964; Bardhan, 1997; Saha and Mallik,

2012; Wang and You, 2012; Forson, 2016).

The contribution of this paper, therefore, is to reexamine and compare contemporary

macroeconomic question of the effect of corruption on growth in Africa taking into

account the element of sustainability drawn from the concept of sustainable develop-

ment. This feeds into the general question of whether the impact of corruption on devel-

opment is homogenous regardless of how development is conceptualised. We as a result

compare the effects of corruption on two but related development outcomes; economic

development and sustainable development. Our research in this regard differs from

others regarding the context and analytical rigor. We in this attempt emphasise the need

for Africa to conceptualise its development trajectory on the basis of sustainability using

a broad-based approach as opposed to the reliance on Gross Domestic Products (GDP)

per capita which measures progress in economic dimension given the flaws it has. GDP

may under or overestimate the impact of corruption given that a higher level of GDP

growth may be misconstrued to imply the economy is doing well in the light of the

explanatory variable(s) being considered. However, when development is conceptualised

on the basis of sustainability with a corresponding measure that takes into account the

four dimensions of sustainable development, the true state of the effect is well appreci-

ated. This is something that is conspicuously lacking on the academic and policy circles

179South African Journal of Economics Vol. 85:2 June 2017

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