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Cited by 14Fiscal Policy and Economic GrowthGlobal trade and economicsEconomic Growth and Development

The manufacturing output effects of infrastructure development, liberalization and governance: evidence from Sub-Saharan Africa

Open access
Nnyanzi, John Bosco, Kavuma, Susan, Sseruyange, John, Nanyiti, Aisha·2022·Journal of Industrial and Business Economics
DOI 10.1007/s40812-022-00216-2PMC PMC9014977
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Abstract

The study draws inference on the effects of infrastructure development, liberalization, and governance on manufacturing production (MVA) in Sub-Saharan Africa. In order to determine the longrun implications of these factors, and for purposes of retaining estimates efficiency and consistency in the presence of complex errors, we employed the Panel-Corrected-Standard-Error estimator on panel data spanning 2003–2018 for 30 SSA countries. The main result of this in-depth analysis shows that infrastructure development as well as governance are key to manufacturing production. While infrastructure development affects MVA positively in the longrun, an improvement in the financial openness facilitates this linkage but only between transport infrastructure on the one hand, and electricity infrastructure on the other, whereas the converse appears the case when trade liberalization is the moderating variable. Overall, regardless of the type of liberalization, manufacturing output is always higher with better institutional quality. Our findings hold after controlling to additional covariates and are robust to alternative estimation measures. Among the other important policy derivatives of our findings, we emphasize that efforts aimed at reversing Africa’s pervasive infrastructure deficit, in ways that enhance manufacturing share in GDP, must be carefully nuanced under the avoidance of the incautious liberalization policies. We render support to the regional efforts to improve infrastructure, substantially curb poor governance while vigorously promoting the rule of law, regulatory quality, government effectiveness, voice and accountability.

AI snapshot

Written from the paper’s full text.

TL;DR

This paper examines how infrastructure, liberalization, and governance shape manufacturing value added in 30 Sub-Saharan African countries from 2003 to 2018. It finds infrastructure and governance generally support manufacturing output, while both trade and financial liberalization directly harm it, with financial openness and governance altering the infrastructure–manufacturing link.

Key findings

  • Infrastructure development is positively associated with manufacturing value added: a one-unit rise in the aggregate index corresponds to a 0.9% higher manufacturing share of GDP. Among components, transport infrastructure shows a similar positive coefficient at 1% significance; water and sanitation has a negative association (a one-unit increase linked to a 0.5% fall in MVA). Electricity and ICT do not show general direct effects, though rural electricity access is linked to a 4% increase and urban access to a 0.2% increase (weakly significant at 10%).
  • Both de jure and de facto liberalization are detrimental: a one-percent improvement in trade integration is associated with a 0.12% reduction in MVA, while a one-unit rise in financial openness is associated with a 4.8% reduction; financial liberalization appears more damaging than trade openness. These are significant at 1%.
  • Governance has a positive direct association: a one-unit improvement in the aggregate institutional quality index is linked to about a 4.2% higher MVA (coefficient 0.042, significant at 1%). Individual dimensions: government effectiveness 0.127%, rule of law 0.116%, voice and accountability 0.077%, regulatory quality 0.096% for one-percent increases, mostly significant at 1% except regulatory quality weakly at 10%.
  • Interaction results: capital account openness strengthens the positive infrastructure–MVA relationship, especially for transport, electricity, and water/sanitation; trade openness weakens the transport infrastructure link. Better governance reduces the positive infrastructure effect on MVA, with negative interaction coefficients across specifications.

Methods

  • Panel of 30 SSA countries over 2003–2018 (16 years), selected by data availability. Infrastructure from AfDB AIDI aggregate and electricity, transport, ICT, water/sanitation sub-indices. Liberalization measured by Chinn–Ito KAOPEN (de jure) and trade share in GDP plus FDI inflows (de facto). Governance from World Bank WGI six dimensions, aggregated via PCA. Controls: GDP per capita, real exchange rate, investment, industrial employment. Sources: AfDB, WDI, WGI.
  • Model based on an augmented Cobb–Douglas manufacturing production function. Estimation uses Prais–Winsten panel-corrected standard errors (PCSE) after tests for cross-sectional dependence (Pesaran CD), autocorrelation (Wooldridge), and heteroskedasticity, because N=30 exceeds T=16. Robustness: dropping South Africa and Nigeria separately and re-estimating with FGLS.

Limitations

  • Stated: no causality analysis; only two-way interactions, not higher-order interactions; future work could test non-linearity and threshold levels for infrastructure and governance.
  • Evident from the text: the sample is limited to 30 countries because others lacked sufficient data on infrastructure, manufacturing share, or related variables, so findings may not cover all of Sub-Saharan Africa.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.1007/s40812-022-00216-2

Cites

87 of 87 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

3 of 15 cited sources checked · 2 supported · 0 flagged · accuracy not yet measured

  • Premisecitation

    Infrastructure development has often been heavily tied to institutional characteristics of countries.

    “the issue of infrastructure development has often been heavily tied to institutional characteristics of countries”
    Quote in the paperNot a substantial claim1 of 3 sources checked
    • cites Ogbaro, 2019 source
    • cites Sahni, Nsiah & Fayissa, 2021

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Zergawu et al., 2020 source
  • Findingown data

    Both de jure and de facto economic liberalization have negative associations with manufacturing contribution to GDP.

    “both the de jure and de facto forms of economic liberalization are detrimental to the manufacturing contribution to GDP.”
    • Also stated in: § Concluding remarks · hedged
      “while trade and financial liberalization exhibit direct detrimental effects on the contribution of manufacturing to total output”
    Quote in the paperSubstantial claim
  • Findingown data

    Only transport, electricity, and water and sanitation infrastructure appear to gain from improved financial liberalization in their effects on manufacturing output.

    “it is only transport (TCI), electricity (ECI) and Water and Sanitation (WSS) infrastructure that appear to gain from the improvement of financial liberalization in their effects on the manufacturing sector output.”
    Quote in the paperSubstantial claim
  • Findingown data

    The negative association with MVA is larger for financial liberalization than for trade openness.

    “data points to larger disastrous effects of financial liberalization relative to trade openness on the MVA.”
    Quote in the paperSubstantial claim
  • Findingown data

    Among infrastructure sub-indices, transport infrastructure has a positive association with MVA similar in magnitude and direction to the aggregate index, significant at 1%.

    “this outcome appears supported only by the transport infrastructure, the coefficient of which is observed similar to that of the overall infrastructure index both in magnitude and direction at 1% level of significance.”
    • Also stated in: § Concluding remarks · hedged
      “The transport infrastructure in particular appears to dominate this effect”
    Quote in the paperSubstantial claim
  • Classified as probably not a substantial claim. 6
  • May combine two claims. 20
  • The quote only partly states this claim. 1

  • Classified as probably not a substantial claim.

    Study design and conductreasoning

    The study uses PCA to compute an aggregate governance indicator from six WGI dimensions to avoid multicollinearity.

    “in order to avoid multicollinearity, the latter is obtained from the six indicators by using the Principal Component Analysis (PCA) technique that has been used extensively in the existing empirics”
    Quote in the paperSubstantial claim1 of 3 sources checked
    • cites Dragos et al., 2016

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Emara & Chiu, 2016 source
    • cites Sharma & Sehgel, 2010 source

  • Classified as probably not a substantial claim.

    Premisecitation

    Liberalization and institutions in SSA are heavily intertwined in their effect on a country's development.

    “the view that liberalization and institutions in SSA are heavily intertwined in their effect on a country’s development is nearer consensus”
    Quote in the paperSubstantial claim1 of 2 sources checked
    • cites Chinn & Ito, 2006 source
    • cites Khan, 2007 source

      In “Initial rapid growth slows down” (page unavailable), the paper says development outcomes depend on the interdependence of growth strategies and governance capabilities, including in countries that liberalized. Its discussion of Africa in “Advanced Countries” (page unavailable) emphasizes institutional support for development, but does not establish a specific liberalization–institutions relationship in sub-Saharan Africa. The paper also describes disagreement over governance reform in Africa rather than calling that view a consensus. (LLM, conf=0.82)

      Experimental — accuracy not yet measured

  • May combine two claims.

    Findingown data

    Cross-sectional dependence test results reject the null hypothesis of cross-sectional independence; all variables except CC and GE exhibit cross-sectional dependence.

    “As Table 2 shows, results exhibit sufficient evidence to reject the null hypothesis of cross-sectional independence, implying that all the variables, with the exception of CC and GE, exhibit cross-sectional dependence.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Capital has a positive and strongly significant association with MVA; a one-percent increase in capital is associated with a 0.04 percent increase in MVA.

    “An increase in capital by one percent is expected for example to lead to an increase in MVA by 0.04 percent, showing that the impact of gross fixed capital formation is strongly significant”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    When infrastructure is disaggregated, only transport infrastructure has a positive significant effect on manufacturing output; the other sub-indices do not.

    “though a disaggregation of the index only provides evidence in support of a positive significant role of transport infrastructure, as opposed to the other sub-indices”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Water supply and sanitation infrastructure has a negative association with MVA; a one-unit increase in its index is associated with a 0.5 percent reduction in MVA.

    “we note a detrimental effect of water supply and sanitation on MVA. In Specification (3) for example, increasing the index by 1 unit would result into a reduction in MVA by 0.5 percent.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingreasoning

    The interaction between infrastructure development and institutional quality is negative in all specifications; the effect of infrastructure development on MVA becomes smaller as institutional quality improves.

    “Table 5 displays a negative interaction effect in all Specifications (1) to (7), both for the aggregated governance indicator and all other individual indicators. By implication, the effect of infrastructure development on the MVA will get smaller as institutional quality improves.”
    • Also stated in: § Concluding remarks · plain
      “the contribution of infrastructure development to MVA dwindles with improving institutional quality”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The estimated associations reflect causal effects of infrastructure, liberalization, and governance on manufacturing value added, not merely correlations.

  • May combine two claims.

    Findingown data

    The total marginal effect in the interaction model is positive and larger than in the non-interacted model (0.009).

    “Statistically, the total marginal effect is positive and larger than the one in the non-interacted model (0.009).”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    The data's error variance structure shows autocorrelation, heteroscedasticity, and cross-panel correlation.

    “On the basis of the above findings indicating that the error variance matrix reveals autocorrelation, heteroscedasticity and correlation across panels”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Capital account liberalization is the only moderator of the infrastructure-development-MVA relationship; its interaction coefficients are positive and significant, suggesting that infrastructure's effect rises with financial liberalization.

    “only the capital account liberalization moderates the relationship between infrastructure development and MVA. The interaction coefficients in all models (1), (2) and (4) are positive and significant, implying that the effect of infrastructure development will increase as financial liberalization improves”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The estimated associations reflect causal effects of infrastructure, liberalization, and governance on manufacturing value added, not merely correlations.

  • May combine two claims.

    Findingreasoning

    The interaction effect of transport infrastructure on MVA in the presence of trade openness is negative; increasing trade integration reduces the positive effect of transport infrastructure.

    “the interaction effect of TCI on MVA in the presence of trade openness is negative. Simply put, the increase of trade integration will decrease the significance of transport infrastructure effect. And since the effect of TCI is positive (Model 3), its effect will be less positive with increasing trade liberalization.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    A one-unit improvement in aggregate institutional quality is associated with a 4.2 percent increase in MVA; the coefficient is 0.042 and significant at 1%.

    “The relevant coefficient in Specification (6), given as 0.042, is statistically significant at 1 percent. By implication, an improvement in the institutional quality by one unit is expected to produce a change in MVA by about 4.2 percent.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    Urban electricity access has a positive but weakly significant association with MVA; a one-unit improvement is associated with a 0.2 percent increase, significant at 10%.

    “A similar change in urban electricity access however would produce a significant change of 0.2 percent in MVA, though the relevant coefficient is observed weakly significant at 10 percent, albeit in the positive direction.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    Foreign direct investment does not appear to benefit MVA; it has a negative coefficient in all models and is weakly significant.

    “foreign direct investment does not appear to benefit MVA as it exhibits a negative coefficient in all models and weakly significant”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Findingown data

    The interaction effect of water and sanitation infrastructure with financial openness and with trade openness is positive, implying that the effect of WSS infrastructure on MVA increases with greater liberalization.

    “The interaction effect of WSS and financial openness on the one hand and trade openness on the other is in both cases positive (Table 4, Columns 5 and 6) implying that the effect of WSS infrastructure on MVA will increase as a country achieves greater liberalization.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Findingown data

    The interaction between disaggregated infrastructure indices and composite governance quality is negative everywhere; increasing governance quality decreases the significance of infrastructure development on MVA.

    “The interaction effect is everywhere negative (Columns 8–11) implying that the increase in governance quality will decrease the significance of infrastructure development on MVA.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Study design and conductown data

    The findings are robust to additional covariates and alternative estimation measures.

    “Our findings hold after controlling to additional covariates and are robust to alternative estimation measures.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Premisenone given

    Governance and liberalization are among the critical factors explaining divergence in performance across developing countries, particularly in the industrial sector.

    “If, as economists agree, governance and liberalization are among the critical factors explaining the divergence in performance across developing countries, particularly in the industrial sector”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisereasoning

    SSA countries likely experienced common shocks because of deeper regional integration, so cross-sectional dependence is present in the panel.

    “Given that SSA countries have formally engaged into deeper integration in the recent decades, that took the form of regional groupings, there is a big possibility to have experienced common shocks that would affect them in a similar way.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S2 (checkable), S3 (load-bearing).

    Premisecitation

    The manufacturing sector plays a dynamic role as an engine of growth.

    “The dynamic role of the manufacturing sector as an engine of growth is well-documented in literature”
    Quote in the paperNot a substantial claim0 of 3 sources checked
    • cites Chenery, 1955

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Clark, 1940

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Cornwall, 1977

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationown data

    The study's results indicate that governance is crucial for MVA and beneficial to all SSA countries.

    “Our results also indicate that governance is crucial for MVA, and therefore beneficial to all SSA countries.”
    Quote in the paperSubstantial claim
    • Rests on an assumption: The 30 sampled SSA countries are representative of all SSA countries, so findings can be generalized to the region.
    • Rests on an assumption: The estimated associations reflect causal effects of infrastructure, liberalization, and governance on manufacturing value added, not merely correlations.

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based). May combine two claims.

    Premisereasoning

    Good governance is a necessary condition for good infrastructure delivery, and vice versa.

    “Implicitly, good governance is a necessary condition for good infrastructure delivery, and vice versa.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisereasoning

    Existing literature's divergent findings and insufficient factors leave the debate on manufacturing production determinants in SSA inconclusive.

    “Nevertheless, the divergences in findings and the insufficiency of these factors in explaining manufacturing production particularly in SSA implies an inconclusive debate on the issue at hand.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim. May combine two claims. The quote only partly states this claim.

    Study design and conductcitation

    The study uses Pesaran's CD test to test for cross-sectional dependence because N is large and T is small.

    “First, we test for cross-sectional dependence using Pesaran’s CD test (2004) in order to determine the appropriate estimation technique.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Pesaran (2004) source
24 of 24

  • The paper relies on this without support.

    The 30 sampled SSA countries are representative of all SSA countries, so findings can be generalized to the region.

    “The study uses a panel of 30 countries from SSA, the choice of which depended on data availability”
    “Our results also indicate that governance is crucial for MVA, and therefore beneficial to all SSA countries.”

  • The paper relies on this without support.

    The estimated associations reflect causal effects of infrastructure, liberalization, and governance on manufacturing value added, not merely correlations.

    “infrastructure development is a very important driver of the manufacturing sector output”
    “an analysis of the causality between infrastructure or governance or economic liberalization and MVA would also be worthwhile undertaking. This wasn’t the subject of our analysis”

  • The paper relies on this without support.

    The exclusion of countries due to missing data does not bias the estimated relationships.

    “Excluded countries from the sample lacked sufficient data on infrastructure development index (e.g. South Sudan), manufacturing share in GDP (e.g. Equatorial Guinea, Eritrea, Guinea-Bissau), inter alia.”
3 of 3

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • Governance and trade liberalization are channels through which infrastructure development impacts industrialization in sub-Saharan Africa.

    “Using the PSCE and FGLS methodology, the authors found that governance and trade liberalization are channels through which infrastructure development impacts industrialization.”

    From Financial development and human capital thresholds for the infrastructure development-industrialization nexus in Africa (2023) · cites this paper as Nnyanzi et al (2022)

    The Results and discussion section (“Interaction effects,” page unavailable) finds that governance and trade openness change the estimated relationship between infrastructure and manufacturing output in Sub-Saharan Africa, supporting their role as moderators. The methodology claim is overstated: the “Robustness checks” section says FGLS was used to re-estimate the baseline model, not the interaction findings; PCSE was the primary estimator. (LLM, conf=0.83)

    Experimental — accuracy not yet measured

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

Each contradiction between two passages listed here was confirmed by an independent check.

  • Electricity interpretation reverses the stated interaction sign

    Minor

    A negative electricity-governance interaction means the effect of electricity becomes more negative as governance quality rises, not less negative as stated.

  • ICT is described as both excluded from and included in interactions

    Minor

    The results say ICT could not be used as an interaction variable, but later discuss an ICT-governance interaction.

  • Financial-openness summary omits a reported water-and-sanitation interaction

    Minor

    The abstract limits the favorable financial-openness interaction to transport and electricity. The results also report a positive interaction for water and sanitation.

3 of 3

Cites

Flagged first, then by citations

5 of the 92 references couldn’t be matched to a known paper.

Research works printed but not linked: 11

  1. Amoasah, F. (2018) Trade liberalization and economic growth: A study on Ghana, Nigeria and Cote d'Ivoire, FIW Working Paper, No. 188, FIW - Research Centre International Economics, Vienna. http://hdl.handle.net/10419/194223
  2. Beji, S., & Belhadj, A. (2016). The determinants of industrialization: Empirical evidence for Africa. European Scientific Journal. https://doi.org/10.19044/esj.2016.v12n10p%25p · DOI
  3. Fedderke, J., & Garlick, R. (2008). Infrastructure Development and Economic Growth in south Africa: A Review of the Accumulated Evidence, Economic Research Southern Africa, Policy Paper, 12. University of Cape Town.
  4. Gafer, T. I., & Saad, B. A. (2009). An empirical analysis of the effect of infrastructure on industrialization in Nigeria, 1980–2005. Journal of International Economic Review, 2(1/2), 135–149.
  5. Gräbner, C., P. Heimberger, J. Kapeller and F. Springholz (2018) Measuring economic openness: A review of existing measures and empirical practices. Institute for Comprehensive Analysis of the Economy Working Paper Series, No. 84, Johannes Kepler University Linz.
  6. Hoyos, R. E., & Sarafidis, V. (2006b). Testing for cross-sectional dependence in panel-data models. The Stata Journal, 6(4), 482–496. · DOI
  7. Nnyanzi, J. B., & Bbale, J. M. (2016). How do liberalization, institutions and human capital development affect the Nexus between domestic private investment and foreign direct investment? Evidence from Sub-Saharan Africa. Global Economy Journal., 16(3), 569–598. https://doi.org/10.1515/gej-2015-0057 · DOI
  8. Sahni, H., Nsiah, C. and Fayissa, B. (2021), Institutional quality, infrastructure and economic growth in Africa (February 3, 2021). Journal of African Development (forthcoming), Special issue on Infrastructure & Finance in Africa. Available at SSRN: https://ssrn.com/abstract=3778399
  9. Seetanah, B. (2009). A sector-wise panel data study on the link between transport infrastructure and FDI in Mauritius. Paper presented at 9th Global Conference on Business & Economics, Cambridge, UK, October 17.
  10. Shafaeddin, M. (2005). Trade liberalization and economic reform in developing countries the IMF. World Bank and Policy Reform, 155(1), 2–20.
  11. Umofia, N., Orji, K. E., & Worika, I. L. (2018). Infrastructural development and the Nigerian industrial sector performance. International Journal of Scientific Engineering and Research, 9(6), 331–335.

Cited by

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Related

Authors
Nnyanzi, J. B., Kavuma, S., Sseruyange, J., & Nanyiti, A.
Affiliations
Makerere University (UG)
Corresponding author
Nnyanzi, John Bosco
ORCID
Venue
Journal of Industrial and Business Economics
Publisher
Springer Science and Business Media LLC
Published
2022-04-18
Volume
49
Issue
2
Pages
369-400
ISSN
  • 0391-2078 (ISSN-L)
  • 1972-4977
DOI
10.1007/s40812-022-00216-2
PMC
PMC9014977
OpenAlex
W4224297844
Cited by
14
References
92
Citations by year
2026: 5 · 2025: 2 · 2024: 1 · 2023: 5 · 2022: 1
FWCI
1.81
Type
journal article
Language
en
Open access
Licence
Locations
  • Journal of Industrial and Business Economics (publishedVersion)
  • PubMed Central (publishedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policy and Economic Growth
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Global trade and economics
  • Physical Sciences › Computer Science › Information Systems › Economic Growth and Development
Keywords
infrastructure development, manufacturing industry, trade liberalization, financial liberalization, governance quality, institutional quality, transport infrastructure, electricity infrastructure, sub-Saharan Africa, manufacturing share of GDP, rule of law, regulatory quality, government effectiveness, voice and accountability

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