A Study on Bank Development, Economic Growth and Unemployment in Sub-Saharan Africa

This thesis focuses on unemployment, development in the banking sector and growth in Sub-Saharan Africa. It comprises two distinct empirical chapters with specific interests. The first investigates the distinctive unemployment issues that plague African economies and their relationship with economic growth, which has increased slightly in recent years. The second empirical chapter focuses on bank development, market structure and the role of institutions in increasing economic growth which is a topic that has been limited in literature for Sub-Saharan countries as a whole. In general, the thesis finds support for the argument that increased growth is necessary for reducing unemployment. The first empirical chapter finds evidence that growth in the economy reduces unemployment with greater effect in non-oil producing countries. Also, human capital accumulation significantly reduces unemployment only in non-oil producing countries. Oil producing countries are probably capital intensive and the governments of these countries are not focusing on creating jobs, due to income coming from oil. In this thesis, panel fixed effects and Dynamic Panel Technique (GMM estimation method) were used. Results obtained from the GMM estimation were very similar to those from the fixed effects method. The second empirical chapter shows that development in the banking industry through an efficient channel of transmission of bank services, cause an increase in economic growth. Also, the structure of the banking market, measured by the Herfindahl–Hirschman Index significantly affects economic growth. Specifically, banking market concentration in Sub-Saharan Africa stimulates growth, due possibly to easing firms’ access to credit.