HUMAN WELL-BEING EFFECTS OF INSTITUTIONS AND SOCIAL CAPITAL

We examine the effects of income, institutions, and social capital-proxied by the level of corruption and ethnic tensions-on literacy and life expectancy in Africa. Random effects estimates show that income has a robust positive influence. GMM estimates indicate that corruption reduces the effectiveness of institutions in promoting literacy. However, this effect is not monotonic; improvements in the corruption index within the high corruption range reduce the effectiveness of institutions, while continuous improvement within the low corruption range enhances the effectiveness of institutions. Similarly, ethnic tensions reduce the effectiveness of institutions. Based on these findings, we conclude that social capital and institutions can complement each other. (JEL O11, O17, Z13).