Fiscal policy and industrialisation dataset

Industrialization challenges in Africa reflect a diverse mix of fiscal choices, governance, and external pressures. This paper examines how fiscal policy, governance, and trade openness jointly influence industrialization in Sub-Saharan Africa (SSA). Using panel data for 25 SSA economies from 2000 to 2024 and a two-step system generalized method of moments estimator, this study investigates whether taxation and public investment promote manufacturing value added, exploring how these effects are conditioned by governance quality and the degree of trade openness. The results show that taxation and gross fixed capital formation positively influence manufacturing value added; however, their effects are significantly mediated by governance. Governance amplifies the investment returns and moderates the role of taxation, supporting the view that institutions act as conduits to industrialization. In contrast, trade openness is negatively associated with industrialization, which is consistent with premature deindustrialization arguments. Therefore, this paper reframes governance as a conditional rather than stand-alone driver of Africa’s industrialization.