Trade, Institutions, Income and Human Development in African Countries

Analysing panel data for the period 1975–2001 from a large group of African countries, we find that trade and institutions (political rights, civil liberties and the rule of law) exert little influence on human development in the form of literacy. Interestingly, income appears to be, by far, the primary determinant of human development, measured by literacy and life expectancy, but with strong diminishing returns. Income also positively affects institutions, although there is a threshold effect, in the cases of political rights and civil liberties. Finally, the paper finds that trade and literacy exercise positive and negative effects, respectively, on political rights.