Validity of Labor Productivity: Imprint of Financial Development and Capital Accumulation in Sub-Saharan Africa

Checking the growing economic development and substantial regional shifts may have a momentous consequence on human development and well-being in several African countries. Thus, this recent study offers the opportunity to explore the nexus between unobserved labor productivity and capital accumulation in a panel of several African economies from 1990 to 2018. “The basic outcomes from the (dynamic) common correlated effects estimator - mean group (CCEE-MG) through cross-section Autoregressive Distributed Lag (CS-ARDL) bearing in mind the presence of cross section reliance and heterogeneity issues, most observed series are preliminarily confirmed stationary and co-integrated. Panel dynamic ordinary least square {PDOLS} and fully modified ordinary least square {FMOLS}” and among other techniques were also adopted in our study where we calibrated the sample into the African sub-region to ensure robustness. The findings reveal that financial progress in the region over time leads to an increase in labor productivity and capital accumulation. Furthermore, financial markets have a progressive impact on the productivity of labor within sub-Saharan African regions. We extend the very limited literature on the nexus between financial development and labor productivity by incorporating capital accumulation into our model which has not been previously studied. Thus, the study recommends that increased capital accumulation and the financial sector significantly impact labor productivity. Therefore, Sub-Saharan African nations must implement appropriate policies to enhance the financial sector and promote capital accumulation. Institutions that are necessary should be created to support the measures in the continents. Regionalizing policies and involving the global community are essential since they will foster the expansion of the financial sector, which will also impact worker productivity.