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Fostering labour productivity growth for the creation of productive and decent job in sub-Saharan African countries: the role of institutional quality

Mamadou BAH
Institutions for job creation, skills acquisition and capacity building of African youth

The majority of jobs created in Africa are informal, low-paying jobs that do not allow employees to live decently. An improvement in labour productivity would contribute to the creation of productive and decent jobs. The objective of this work is to study the effect of institutional quality on labour productivity in sub-Saharan Africa. To do this, we considered a panel of 31 countries over the period from 1996 to 2016. Thus, we constructed an empirical model based on the stochastic frontier production function developed by Battese and Coelli (1995), to which we applied panel estimation techniques (static and dynamic), particularly with GMM system and within estimators. Our results show that institutional quality indicators have a positive and significant influence on labour productivity. Political stability, government effectiveness and the rule of law are the indicators that contribute most to increasing labour productivity in sub-Saharan Africa. A series of robustness tests were performed to confirm our results. We have identified, for the different sectors of the economy (agriculture, industry, services), the specific indicators that contribute to labour productivity growth in sub-Saharan Africa. These results have enabled us to identify several economic policy recommendations relevant to African decision-makers in order to create productive and decent jobs, especially for young people.