Impact of Industrialisation on Economic Development in Selected African and Asian Economies: The Role of Institutional Quality and Investment Climate

Abstract

This paper uses system generalised method of moments (GMM) to examine the moderating role of institutional quality and investment climate on the impact of industrialisation on economic development among selected African and Asian economies from 1995 to 2018. Results confirm a positive and statistically significant moderating role of institutional quality and investment climate on the impact of industrialisation on economic development between the two continents. Nevertheless, the moderating role is more pronounced in Asian economies than in African economies. We, therefore, propose that policymakers and development practitioners consider policies that promote institutional development and conducive investment climate to enhance industrial development in these countries, which ultimately leads to economic development. In that regard, African economies should first build merit-based public sector employment, which can then allow for the building of strong institutions and improvement of the investment climate. Furthermore, African countries should address deficiencies in fundamentals like infrastructure, ensure coordination of activities between private and public sector and prioritise designing and implementing soft industrial policies or policies that promote industrialisation. These could enhance the impact of institutions and investment climate on the effect of industrialisation on economic development in Africa. © The Author(s), under exclusive licence to Springer Nature Switzerland AG 2023.