The Impact of Good Governance on Socio-Economic Growth in Djibouti

Good Governance on Socio-Economic Growth

Abstract

Djibouti is a small, low-income country that faces significant governance challenges. Despite efforts to improve governance, Djibouti remains among the lowest-ranked countries globally in terms of political freedom and transparency. The relationship between governance and economic growth in Djibouti is not well studied. This study aimed to examine the impact of good governance on economic growth in Djibouti. Specifically, it analyzed the effects of political stability, institutional quality, and corruption on economic growth. The study utilized a quantitative, regression analysis approach. Secondary data on governance indicators and economic growth in Djibouti over 36 years (1987-2022) were gathered from World Bank sources. Political stability, institutional quality, and corruption were the independent variables, while GDP per capita was the dependent variable. The findings showed that political stability and reduced corruption significant positive impacts economic growth in Djibouti. However, contrary to expectations, improved institutional quality appeared to retard growth. Together, the governance variables explained over 50% of the variation in GDP per capita. The study provides important insights into the drivers of economic growth in Djibouti. The results highlight the need to promote political stability and combat corruption. However, strengthening institutional capacity may not spur growth in the short term. The findings have implications for policymakers seeking strategies to improve governance and accelerate development in Djibouti. Further research is needed to understand the unexpected institutional quality effects better.