Thesis Presented for the Degree of
Doctor of Philosophy
In the Faculty of Law, Commerce and Management
University of Witwatersrand
June 2016 / Zambia has had impressive economic performance in the last decade and half, however its growth
remains unsustainable due to a number of factors that range from poor terms of trade to challenges
in macroeconomic management. In addition, the country’s weak economic and political
institutional framework characterised by insecure property rights and uncertainty in the policy
environment pose further challenges to economic growth. Although the country has undertaken a
number of economic reforms in recent years to spur growth, their impact has been modest because
of weak institutional setups and capacity constraints. Notably, certain key policy reforms and
programmes that are critical for enhancing economic performance in Zambia have not been
implemented because of institutional and administrative weaknesses underpinned by policy
inconsistencies and policy reversals.
Against this background, the main purpose of this study is to investigate the impacts of formal
institutions particularly property rights and political instability on economic growth in Zambia. It
achieves this by extending Fedderke et al. (2011)’s time series on property rights and political
instability measures on Zambia by constructing comparable indices that are later merged with the
initial series. The merged series are then used to capture the institutional dimensions on economic
output in Zambia from 1965 to 2010. The study uses in its methodology a PSS-F test to determine
causality among variables of interest and later applies the VECM estimation procedure to
determine cointegration and long-run relationships among the regressors.
Despite the increasing role and influence of formal institutions in economic development, there
have been relatively few empirical studies that have specifically examined their impacts at country
level. This study is therefore an attempt to partially fill the void by throwing light on the impact of
property rights and political instability on Zambia’s economic growth over the study period.
The study findings have confirmed the hypothesis that there is a strong and positive relationship
between property rights and the level of economic growth. The results have been validated using
Zambia as a case study and hence the findings are consistent with empirical evidence and economic
theory in new institutional economics (NIE).
Noteworthy is the strong and positive effect of property rights on real GDP—clearly suggesting
that potential investors will always take into account a country’s institutional environment before
investing their resources. This means that a good performance in the rating of the property rights
index on the scale between 0 and 100 leads to a corresponding strong economic performance in
Zambia.
By implication, a higher rating of the property rights index suggests a well secured regime of
property rights. Conversely, a lower rating of the property rights index implies deterioration in the
quality and enforcement of property rights in the country and hence adverse to economic growth.
Thus, the findings are in line with several similar empirical works that conclude that formal
economic institutions (property rights) are the fundamental cause of income differences and longrun
growth between and among countries.
As expected, our study also found a strong but negative relationship between political instability
and economic performance. This means that perverse political institutions such as violent civil
protests, political violence, attempted military coups, labour and/or industrial unrest in Zambia are
a disincentive to economic growth as they discourage long-term investments. Investors are
generally driven by perceptions, that is, the more politically stable an economy is assumed to be,
the higher the chances of attracting foreign direct investments.
Conversely, the stronger the negative perceptions about an economy the less likely will investors
bring in their resources—hence the need for political stability. The findings are consistent and
comparable to many other studies that found that political instability was significantly related to
economic growth and that an increase in instability, other things being equal, always tends to lower
real growth rate over time.
The study also examined the impacts of selected macroeconomic policy variables namely foreign
direct investments (FDI), credit to the private sector (CRDTP), trade openness (TROP), capital
formation (CALARAT) and human capital (ENROLL) on Zambia’s real GDP and found that they
had a strong feedback effect on growth performance.
In terms of policy implications, the study recommends that authorities should invest in efforts that
strengthen the regime of property rights and the rule of law for strong economic performance in
Zambia. More specifically, the authorities should respect and enforce private property rights
through impartial courts of law to instil confidence in the investor community. In addition, the
government should promote social dialogue and foster an environment of industrial harmony to
avoid labour-related unrest and political conflicts (political instability) that have a potential to hurt
the business environment by scaring off would-be investors. / MB2016
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/21571 |
| Date | January 2016 |
| Creators | Zulu, Jack Jones |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | Online resource (xiv, 183 leaves), application/pdf |
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