Nexus between digitalisation and institutional quality in Africa: Partial aggregation perspective.

Abstract

The advancement of the internet of things (IoT) and artificial intelligence (AI) has given rise to smart living, where digitalisation is prioritised as one of the socioeconomic progress factors. Among socioeconomic progress, state efficiency in the handling of governance and the justice system is key to institutional quality. The breakout of the pandemic has caused significant disruptions in daily endeavours across the globe, and that necessitated more use of the internet due to lockdown. It also allowed for the opportunity for the use of digital technologies to increase and facilitate economic activity as well as improve institutional quality and service delivery in the interest of addressing socio-economic dynamics across the globe. Thus, this study examines the nexus between digitalisation and the quality of economic and governance institutions in order to establish causal relationships. The study deploys panel data analysis from 2000 to 2022 for forty-eight African countries. The study employed principal component analysis (PCA) to construct the indices that measure digitalisation and institutional quality. The Dumitrescu-Hurlin (DH) causality test was deployed to examine the causal relations between digitalisation and institutional quality. The results from the stylised facts confirmed the presence of a digital divide in Africa. In addition, the DH causality test revealed mutual feedback between digitalisation and institutional quality. The study recommends that African countries should prioritise efficient governance and administration that will foster the development of the telecommunications sector in order to ensure increased digital penetration in the African region.Journal