1 / 28

Week 1.1: Economic Growth in Africa Takashi Yamano

Development Issues in Africa Spring 2006. Week 1.1: Economic Growth in Africa Takashi Yamano. The Economics of Being Poor. Most people in the world are poor. If we knew the economics of being poor, we would know much of the economics that really matters. Theodore W. Schultz

arella
Download Presentation

Week 1.1: Economic Growth in Africa Takashi Yamano

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Development Issues in AfricaSpring 2006 Week 1.1: Economic Growth in Africa Takashi Yamano

  2. The Economics of Being Poor • Most people in the world are poor. • If we knew the economics of being poor, we would know much of the economics that really matters. • Theodore W. Schultz • Nobel Lecture: The Economics of Being Poor, • Journal of Political Economy, • 1980, vol. 88: 639-651.

  3. The Economics of Being Poor • Most of the world’s poor people earn their living from agriculture. • If we knew the economics of agriculture, we would know much of the economics of being poor. • Theodore W. Schultz • Nobel Lecture: The Economics of Being Poor, • Journal of Political Economy, • 1980, vol. 88: 639-651.

  4. Development Issues in Africa • Objective: • To apply economic theory to economic problems in Sub-Saharan Africa • to obtain broad descriptive information on various economic and social problems in Sub-Saharan Africa • To develop academic communication skills • Methods: • Lectures and Student Participations • Plan: see Syllabus

  5. Week 1Economic Growth in Africa:

  6. Economic Growth in Africa • Today’s contents • Overview • Evidence from Cross-country Models • Does History solve the Africa mystery? • Can political reform provide solutions?

  7. Map of Africa

  8. Phase 1: Pre and Post Independence Period in 1955-1973 • Economic History in Africa Phase 2: Oil Crisis and Export Goods Price Declines in 1973-1980 >> Debts Expansion Phase 3: Adjustment Period in 1980-1995 Phase 4: Post Washington Consensus Period in 1995-presence Phase 5: Some Bright Spots?

  9. Annual Growth Rate (%) • Economic Growth GNI per capita in 2000 and 2004

  10. Best and Worst Performers in the 1990s

  11. GNI in US$ in 2004 (% in total SSA) South Africa (43%) Kenya (3%) Angola (4%) Sudan (4%) Nigeria (12%)

  12. Source: Deaton (1999) Journal of Economic Perspective vol. 13: 23-40

  13. Countries that are missing Economic Growth rates in 1970s: • Angola, Cape Verde, Comoros, E. Guinea, Eritrea, Ethiopia, Guinea, Mauritius, Mayotte, Mozambique, Namibia, Tanzania, Uganda • War and Conflict in 1960-2001 • Angola, Burundi, Chad, Congo-Brazzaville, Congo (Zaire, DRC), Eritrea, Ethiopia, Guinea-Bissau, Liberia, Mozambique, Namibia, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, South Africa, Sudan, Uganda, Zimbabwe

  14. Cross-Country Regression Models • There are serious problems with cross-country regression models • Missing data • Missing variables • Poor quality in data • Small number of observations • We can still obtain some insights

  15. Cross-country Regression Studies • Easterly and Levine (1997) QJE • “Africa’s Growth Tragedy: policies and ethnic divisions” • Africa’s high ethnic fragmentation explains poor economic policies and performances. • Sachs and Warner (1997) JAE • “Sources of slow growth in African Economies” • Africa’s slow growth can be explained in an international cross-country framework: • Poor economic policies • Africa’s lack of openness to international markets • Lack of access to the sea • Tropical climate/diseases

  16. Easterly and Levine (1997) QJE • “Africa’s Growth Tragedy: policies and ethnic divisions” • Ethnic diversity explains a substantial part of public choices, political instability, and other economic factors associated with long-run growth. Ethnic Diversity Economic Growth Public Policy Choices

  17. Ethno-linguistic Fractionalization Index (ETHNIC)

  18. AFRICA dummy remains significant ETHNIC weakens as policy choices are included

  19. Ethnic Diversity, Political Instability, and Policy Choices ETHNIC is correlated with (+) Schooling (-) Financial Depth (+) Black Market Premium (-) Infrastructure But not with Assassinations Fiscal surplus

  20. Easterly and Levine (1997) QJE Summary • Africa’s poor growth is associated with • low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, and insufficient infrastructure. • Ethnic diversity is closely associated with • Low schooling, underdeveloped financial systems, distorted foreign exchange markets, and insufficient infrastructure Ethnic Diversity Economic Growth Public Policy Choices

  21. Englebert (2000) WD • “Solving the Mystery of the African Dummy” • African Dummy remains significant in regression models, suggesting that specifically African characteristics, not captured by explanatory variables, exist. What is it? • Hypothesis: the lack of historical continuity from the pre-colonial to the post-colonial period constraints the options available to African policy makers. Legitimacy Problem!

  22. How to measure legitimacy?

  23. Legitimate countries in Africa • 10 out of 38 in the data: Botswana, Burundi, Cape Verde, Ethiopia, Lesotho, Mauritius, Rwanda, Sao Tome, and Principe, Seychelles, and Swaziland • Non-legitimate countries outside Africa: • Latin America: Bolivia, Guatemala, Peru, Ecuador • Asia: India, Indonesia, Malaysia, the Philippines

  24. Comparison between Legitimate and Non-legitimate

  25. Englebert (2000) WD Summary • Legitimacy is correlated with policy choices • Legitimacy is an important determinant of economic growth: legitimate states grow 2.2 % faster than their non-legitimate counterparts • Results call for a greater integration of political science into the study of economic growth. • There are reasons (e.g., legitimacy) for bad policy choices. Economists need to know about them.

  26. Further Readings • Acemoglu, Johnson, and Robinson (2001). “Colonial origins of comparative development: an empirical investigations,” AER, 91 (5): 1369-1401. • They divide colonialism into Settlement and Extractive: • Settlement: Institutions that protect property rights were created and helped post-colonial development. • Extractive: Resources were only extracted, and institutions that protect property rights did not develop. • Settler mortality had a large impact on choosing settlements. • The authors show that • Mortality >> Settlement/Extractive >> Institutions >> Economic Growth

  27. Source: Acemoglu, et al. (2001) AER vol. 13: 23-40

More Related