This paper examines the effect of effective state-business relationships on economic growth in Sub-Saharan Africa. We use a measure proposed by Te Velde (2006) that can capture the various dimensions of effective state-business relationships to estimate standard growth regressions using dynamic panel data methods, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state-business relationships contribute significantly to economic growth in a panel of nineteen Sub-Saharan African countries over the period 1970-2004. These countries which have shown improvements in state-business relationships have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.
IPPG Discussion Paper Series Number Eight, DFID, London, UK, 16 pp.