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Does economic freedom enhance quality of life in Africa?

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Abstract

This paper examines the role that the level and changes in economic freedom play in promoting quality of life in Africa over the period 1985–2016. It develops a composite index for quality of life to capture the different dimensions of quality of life. Employing the generalised method of moments (GMM) estimation technique, the results indicate a positive effect of economic freedom on the quality of life. However, change in economic freedom has an inverse relationship with the quality of life in Africa. The GDP growth and foreign aid have positive effects on the quality of life index and its various indicators. The findings highlight the need for African countries to establish fiscal and monetary policies suitable for improving economic freedom. It also emphasizes the need for African countries to reduce international trade barriers and open up African economies to foreign trade. This will bring about increased economic growth and improved quality of life.

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Fig. 1

Source: Author’s Construct, 2021; Data sourced from EFW, Fraser Institute

Fig. 2

Source: Author’s Computation, 2021, Data sourced from EFW, Fraser Institute

Fig. 3

Source: Author’s Construct, 2021. Data sourced from WDI of World Bank

Fig. 4

Source: Author’s Construct, 2021. Data sourced from WDI, World Bank

Fig. 5

Source: Author’s Computation, 2021, Data sourced from EFW, Fraser Institute

Fig. 6

Source: Author’s Computation, 2021, Data sourced from WDI, World Bank

Fig. 7

Source: Author’s Computation, 2021, Data sourced from WDI, World Bank

Fig. 8

Source: Author’s Computation, 2021, Data sourced from WDI, World Bank and EFW, Fraser Institute

Fig. 9

Source: Author’s Computation, 2021, Data sourced from WDI, World Bank and EFW, Fraser Institute

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Acknowledgements

The authors wish to thank the anonymous reviewers for their very helpful comments and feedback on this article. The views in this paper are the authors’ and do not necessarily represent those of the affiliated institutions.

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Appendices

Appendix 1

List of 44 African countries used

Algeria

Angola

Benin

Botswana

Burkina faso

Burundi

Cameroon

Cabo verde

Central African republic

Dr Congo

Congo republic

Cote d'ivoire

Egypt

Ethiopia

Gabon

Gambia

Ghana

Guinea

Guinea Bissau

Kenya

Lesotho

Liberia

Libya

Madagascar

Malawi

Mali

Mauritania

Mauritius

Morocco

Mozambique

Namabia

Niger

Nigeria

Rwanda

Senegal

Seychelles

Seirra Leone

South Africa

Tanzania

Togo

Tunisia

Uganda

Zambia

Zimbabwe

 

Appendix 2

For stationarity tests, the study uses a broad range of panel unit root tests: the LLC (Levin, Lin and Chu, 2002), the IPS (Im, Pesaran and Shin., 2003), and the ADF- and PP-Fisher Chi-square (Maddala and Wu, 1999) and Breitung’s (2000) t-statistic. As shown in Table 1, the results of the stationarity test show that out of the ten variables tested, five of the series are stationary at a level, while five are stationary at first difference. Next, we perform co-integration tests among variables used in the models estimated.

Appendix 3

Pedroni examines properties of residual-based tests for the null hypothesis of no co-integration for dynamic panels’ variables wherein both the short-run dynamics and the long-run slope coefficients are allowed to be heterogeneous across individual members of the panel. Pedroni puts into consideration both pooled within dimension tests and group mean between dimension tests. The test results in Table 2 show seven test statistics for each model estimated, consisting of Panel-v, Panel-rho, Panel-PP, Panel-ADF, Group-rho, Group-PP, and Group-ADF. The co-integration results presented in Table 2 are for models with quality of life as dependent variable. The result in Table 2 shows that with intercept and trend, five of the test statistics accept the null hypothesis of no co-integration, while six of the test statistics reject the null hypothesis of no co-integration, meaning that there is co-integration among the variable in the models.

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Okunlola, O.C., Akinlo, A.E. Does economic freedom enhance quality of life in Africa?. Int Rev Econ 68, 357–387 (2021). https://doi.org/10.1007/s12232-021-00372-2

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