JEFMS Journal

ABSTRACT:

Africa in general and precisely Sub-Saharan Africa (SSA) has been performing dismally in economic freedom determination parameters. This has substantially diminishes the probabilities of keeping up with other regions which have so far flourished in terms of sustainable economic and human development as highlighted through economic freedom index by the Heritage Foundation 2021. It is for this reason that this study purpose to investigate the influence of value added components of GDP on economic freedom. This is explored using a panel of 40 Sub-Saharan African (SSA) countries from 1995 to 2019. Using both conventional unit root and co-integration tests showed that all the series are stationary and co-integrated of order one I(1). Further estimations on the long-run relationship using dynamic panel econometric techniques key in accounting for panel data hiccups. Specifically, fixed effect and general method of moments which is adopted to discourse concerns of endogeneity and serial correlation commonly associated with panel data. Key significant results based on GMM indicate that both value added growth components of industry and service sectors positively and significantly influences economic freedom but the effect is negative regarding value added from agriculture sector. Inward FDI was equally found to positively influence for the overall score of economic freedom for SSA The practical implication is that for an increasing economic freedom, SSA economies or decision makers should gear for policies that improve industrial production by creating an enabling environment, encouraging the service sector through incentives and tax holidays, diversify agriculture and minimize wasteful FDI inflow. All these are critical in a bid to the realization of competitive economic freedom in SSA.

KEYWORDS:

Economic freedom; value added components (VAC) of GDP; FDI, SSA, GMM

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