Governance Quality and Economic Growth in Ethiopia: Causal Evidence, Threshold Effects, and Institutional Reform Priorities, 2026
Ethiopia presents one of the most instructive paradoxes in contemporary development economics: av... more Ethiopia presents one of the most instructive paradoxes in contemporary development economics: average real GDP growth of 7.78% per annum over 1996-2023 coexisted with governance quality scores averaging-0.83 standard deviations below the global mean on the World Bank's Worldwide Governance Indicators (WGI). This study investigates the causal impact of governance quality on economic growth in Ethiopia using a four-stage econometric strategy applied to 28 years of annual time-series data. First, ARDL Bounds Testing (Pesaran, Shin & Smith, 2001) confirms long-run cointegration between all six WGI governance dimensions and real GDP growth; the composite governance index exerts a long-run positive effect (β = 1.842, p < 0.01) with a speed of adjustment of 41.2% per year. Second, System-GMM (Blundell & Bond, 1998) causal identification confirms a robust governance-growth effect (β = 1.293, p < 0.01) after controlling for reverse causality, and reveals that governance quality significantly amplifies FDI's growth contribution through an interaction mechanism (β = 0.682, p < 0.05). Third, Hansen (1999) threshold regression identifies a critical governance quality threshold at τ =-0.74 on the WGI scale, below which governance-growth elasticity is modest (β₁ = 0.612) and above which it more than triples (β₂ = 2.318). Rule of Law (β = 2.114) and Government Effectiveness (β = 1.842) exerts the largest dimension-specific growth effects; Voice and Accountability is statistically insignificant, consistent with the developmental state literature. All results survive comprehensive robustness checks. These findings reframe Ethiopia's growth paradox: high growth was achieved despite, not because of, governance deficits, and future productivity-led growth will require surpassing the identified governance threshold through prioritised institutional reforms in Rule of Law, Government Effectiveness, and Control of Corruption.
Practices, Challenges, and Prospects of Corridor Development: The Case of Megenagna to CMC, 2025
Urban corridors have emerged as critical instruments for managing rapid urbanization in developin... more Urban corridors have emerged as critical instruments for managing rapid urbanization in developing cities, yet their governance, social effects, and long-term sustainability remain underexplored in sub-Saharan African contexts. This study examines the practices, challenges, and prospects of corridor development along the 7-kilometre Megenagna-CMC axis in Addis Ababa, Ethiopia-one of the city's most strategically significant urban arteries. Adopting a pragmatic mixed-methods design, the study drew on structured surveys administered to 346 residents, commuters, and business owners, supplemented by in-depth interviews with 24 urban planners and policymakers. Quantitative data were analysed using descriptive statistics, while qualitative responses were subjected to thematic analysis. Findings reveal a fundamental tension between measurable physical progress-including road upgrades, utility installation, and improved service deliveryand persistent institutional and social deficits. Planning processes were perceived as opaque and top-down (mean = 2.63), stakeholder consultation as inadequate (mean = 2.63), and community displacement as the most severe challenge (mean = 3.54). Respondents nevertheless expressed strong optimism about long-term prospects, particularly regarding sustainable practices (mean = 3.90), land-use optimization (mean = 3.86), and transport connectivity (mean = 3.77). Community engagement (mean = 4.07) and environmental conservation (mean = 4.06) ranked as the most critical long-term strategies. The study concludes that sustainable corridor development requires shifting from infrastructure-centric to governance-centric approaches, embedding participatory planning, inter-agency coordination, and social protection mechanisms as foundational-not supplementary-elements of urban development policy.
The Contribution of the Textile and Clothing Industry to Economic Growth of Ethiopia: An Autoregressive Distributed Lag (ARDL Bounds) Testing Approach
In Ethiopia, there is a notable scarcity of national research on the topic. Because of this, furt... more In Ethiopia, there is a notable scarcity of national research on the topic. Because of this, further in-depth scientific investigation was needed to ascertain how the TCI industry fits into the country's overall economy. Thus, the main objective of this study was to better understand how the TCI sector contributes to Ethiopia's economic growth by examining the relationships between real GDP growth and the sector's employment opportunities measured in terms of pay adjusted for the annual inflation rate, fixed capital formation adjusted for constant prices in 2015, the net exports of TCI, and control variables: the size of the working-age population (aged 15 to 64), total exports (percentage of GDP), and the nation's government effectiveness indicator. Using annual time series data from the period 1996 to 2021, the ARDL estimation method was used to determine how the long-run and short-run correlations among the variables interacted. The empirical findings indicated that, in the existence of a long-run relationship between the variables, fixed capital formation and employment opportunities have both a significant and positive relationship to real GDP growth, while net exports have a significant but negative relationship. The size of working-age population (aged 15 to 64), the total export of the country (percentage of GDP), and the government effectiveness indicator have a significant and positive relationship with the real GDP. In the short-run ECM, only the net export and government effectiveness index have significant contribution to economic growth. The study suggests that the government should seek to attract significant inflows of FDI to progress in fixed capital formation, and implement export-oriented development policies to improve the sector's export performance, and implement realistic employment regulations in order to increase the number of jobs available in the industry that pay well.
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