Spatial Effect of Political Risk on Economic Growth in Africa

Abstract

The purpose of this article is to highlight and quantify the spatial effects of political risk on economic growth among African countries. We design a spatial model of growth derived from the Mankiw - Romer - Weil model by introducing spatial interactions. Spatial spillover effects occur because political risk incurred by a country influences not only the country’s economic growth, but also the economic growth of other geographically close countries through a spatial multiplier effect. The econometric estimates concern a sample of 34 African countries from 1985 to 2015. Results show that the economic performance of African countries is negatively interdependent, and the spatial interdependence passes through political risk. It is indicated that natural resources and religious tensions have direct negative effects on growth. On the other hand, democracy and governmental stability have positive direct effects on economic growth but impede the economic development of neighboring countries. However, external conflicts are not necessarily harmful to neighboring countries. These dynamics illustrate the complexity of conflicts and political instability in Africa.