Urbanization and sustainable economic growth: The role of institutional quality

Abstract

In examining the effects Ghana’s urbanization has on sustainable economic growth and the role regulatory quality plays in the process, the study specifically looks at how institutional quality through regulatory quality plays in mitigating the negative effects of urbanization on sustainable economic growth. This was done using the Autoregressive Distributed Lag (ARDL) model to evaluate yearly time series data provided by World Development Indicators (WDI) and World Governance Index (WGI) from 1990 to 2022. The results show that urbanization has a significant negative short-term and long-term effect on sustainable economic growth. Additionally, without regulatory quality, urbanization has a detrimental, albeit slight effect on sustainable economic growth; nevertheless, in their presence, the study finds a noticeable and significant positive effect in the long run. The study proposes as a recommendation that Government should enforce institutional reforms that prioritize environmental quality within regulatory frameworks. They should establish mechanisms that encourage the convergence of economic development and environmental protection, ensuring that regulatory systems are not only strong but also directed towards environmental and economic sustainability. There should also be support for enforcement units in the country, to build capacities for effective environmental policy formulation and implementation. This could include technological assistance, capacity-building programs, and financial aid to enhance capabilities in managing environmental challenges while fostering sustainable economic growth.