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Institutional Quality and Household Welfare in Nigeria: Dynamic Evidence from ARDL and FMOLS Estimation

Jude Cornelius Okwor, Oluchukwu F. Anowor

Abstract

Nigeria’s persistent governance deficits and high poverty rates raise an important question regarding the extent to which institutional quality shapes household welfare outcomes. This study examines the dynamic relationship between institutional quality and household welfare in Nigeria from 1996–2022 using the Autoregressive Distributed Lag bounds testing approach and Fully Modified Ordinary Least Squares for robustness. Institutional quality is measured using the World Bank’s Worldwide Governance Indicators, while household final consumption expenditure per capita proxies’ welfare. Real GDP per capita, inflation, financial development, and trade openness are included as control variables. The findings reveal a significant long-run cointegrating relationship between institutional quality and household welfare. ARDL estimates indicate that improvements in institutional quality significantly enhance welfare, while FMOLS results confirm robustness. Diagnostic tests validate model stability and reliability. The study concludes that strengthening rule of law, government effectiveness, and corruption control is critical for improving household welfare and achieving sustainable development in Nigeria.

Keywords

Institutional quality; household welfare; ARDL bounds testing; FMOLS; cointegration; governance; Nigeria JEL Classification: E02I31O12D73C22

References

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