The varied effect of human capital on industrialisation in Sub-Saharan Africa (SSA): the role of institutions

Abstract

In Chapter VIII of the United Nations 2030 Agenda for Sustainable Development, human capital has an important role to play in achieving the Sustainable Development Goals (SDGs). This study examines the role of institutions in the effect of human capital on manufacturing sector growth in 30 sub-Saharan African countries. To this end, the study uses a dynamic panel model using the generalized method of moments in the system over the period 1995-2018. The results show that secondary and tertiary enrolment rates have a positive and significant relationship with manufacturing value added growth, while primary enrolment rates show mixed effects. This demonstrates the differentiated nature of human capital. The results also show that human capital and institutional quality are conditionally productive. The results show that the effect of human capital on industrialisation is mediated by institutional quality. These results call on African governments to promote the development of the industrial manufacturing sector by improving the institutional framework to enable citizens to increase their level of education.