Why has Africa Grown So Slowly?

Why has Africa Grown So Why has Africa Grown So Slowly?Slowly?

Xavier Sala-i-MartinXavier Sala-i-Martin

Columbia UniversityColumbia University

Figure 1: GDP per Capita

$1,000

$1,500

$2,000

$2,500

1960 1965 1970 1975 1980 1985 1990 1995 2000

Africa Sub-Saharan Africa

Figure 3: Divergence: Per Capita GDP Relative to United States

1960 1965 1970 1975 1980 1985 1990 1995 2000

Figure 5: Gini Coefficient

Figure 6: Theil Index for Sub-Saharan Africa

Overall Inequality Across-Country Inequality Witin Country Inequality

Figure 7: Income Distribution in Nigeria

$10 $100 $1,000 $10,000

1970 1980 1990 2000

Figure 8: Absolute Consumption Poverty Rates

1970 1975 1980 1985 1990 1995 2000

All Africa Sub-Saharan Africa World

Figure 10: Investment Rates

1961 - 1965 1965 - 1970 1970 - 1975 1975 - 1980 1980 - 1985 1985 - 1990 1990 - 1995 1995 - 2000 OECD East Asia

Africa Sub-Saharan Africa OECD-East Asia

Figure 11: Private to Public Investment Ratio

Africa North Africa Sub-Saharan Africa OECD East Asia

1980s 1990s

Distortions and the Cost of Distortions and the Cost of InvestmentInvestment

• Investment is low in AfricaInvestment is low in Africa

• Investment is ExpensiveInvestment is Expensive

• Risk may be overstatedRisk may be overstated

Figure 13: Relative Price of Investment

Africa Sub-Saharan Africa North Africa OECD East Asia

Survey of Business LeadersSurvey of Business Leaders

Figure 8: Infrastructures

Ethiop

ambiqu

EAST ASIA

Human CapitalHuman Capital (1): (1): EducationEducation

• School Enrollments are lowSchool Enrollments are low

• Investment in Education does not Investment in Education does not lead to more enrollment: incentiveslead to more enrollment: incentives

• Education of GIRLS has added Education of GIRLS has added benefits in terms of Health and benefits in terms of Health and FertilityFertility

Figure 14: Primary School Enrollment

Figure 10: Human Capital (Quality of Education)

Gambia

Nigeria

Ethiop

EAST ASIA

EAST EUROPE

Human Capital (II): HealthHuman Capital (II): Health

• Life expectancy has increased in Life expectancy has increased in African over the last 40 years but:African over the last 40 years but:– AIDSAIDS– MalariaMalaria

• We now face a public health crisis, a We now face a public health crisis, a pandemic of biblical proportionspandemic of biblical proportions

Figure 15: Health (1): Life Expectancy

Figure 16: Health (2): Malaria Prevalence

Figure 11: Human Capital (Health)

Gambia

Nigeria

Ethiop

ambiqu

EAST ASIA

EAST EUROPE

Geography, Tropics and Geography, Tropics and InstitutionsInstitutions• Most Sub-Saharan Africa has adverse Most Sub-Saharan Africa has adverse

Geography:Geography:• LandlockedLandlocked• TropicalTropical

– Direct impact on productivity (soil, specific Direct impact on productivity (soil, specific agricultural productivity,…) (Sachs and Warner 1995)agricultural productivity,…) (Sachs and Warner 1995)

– Direct impact on health and, thus, productivity Direct impact on health and, thus, productivity (Sachs and Warner 1995)(Sachs and Warner 1995)

– Indirect impact on institutions (Acemoglu et al. 2000)Indirect impact on institutions (Acemoglu et al. 2000)• INSTITUTIONS AND NATURAL RESOURCES (Nigeria, Sala-I-INSTITUTIONS AND NATURAL RESOURCES (Nigeria, Sala-I-

Martin and Subramanian 2003)Martin and Subramanian 2003)

Figure 17:Geography: Tropical Area

Figure 1: Property Rights

ritius

ar Mal

Ethiop

Zimbab

Angola

EAST ASIA

EAST EURO

Survey of Business Leaders. Survey of Business Leaders. Corruption and the Natural Corruption and the Natural Resource CurseResource Curse

Figure 2: Corruption

ritius

ar Mal

Ethiop

Zimbab

Angola

EAST ASIA

EAST EURO

Figure 3: Government Inefficiencies (Red Tape, Bureaucracy, Waste)

Ethiop

EAST ASIA

Figure 5: Overall Institutions (Public and Private)

Ethiop

ambiqu

EAST ASIA

Openness (Globalization?)Openness (Globalization?)

• Africa is essentially CLOSED (1% of Africa is essentially CLOSED (1% of world trade)world trade)

• And whatever Trade depends too And whatever Trade depends too much on a single natural resource much on a single natural resource (oil, diamonds,…)(oil, diamonds,…)

Is Globalization to Blame?Is Globalization to Blame?

• What is it? Free Movement of What is it? Free Movement of – CapitalCapital– LaborLabor– GoodsGoods– TechnologyTechnology– InformationInformation

• Have any of these arrived in Africa?Have any of these arrived in Africa?

Figure 18: Openness

Excessive Public Spending and Excessive Public Spending and “bad government”“bad government”

Figure 19: Government Consumption Share of GDP

Figure 16: Goods Markets and Business Environment

Gambia

Nigeria

Ethiop

EAST ASIA

EAST EUROPE

• See all the slides on Institutional See all the slides on Institutional EnvironmentEnvironment

Ethnic Fractionalization and Ethnic Fractionalization and ConflictConflict

• Countries at war between 1960-Countries at war between 1960-2002: 2002: Algeria, Angola, Burundi, Chad, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Guinea-Bissau, Liberia, Libya, Mauritania, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sierra Leone, Somalia,

South Africa, Sudan, Togo, Uganda or Zimbabwe.

Figure 20: Ethnolinguistic Fractionalization

Figure 23: Security

Gambia

Nigeria

Ethiop

EAST ASIA

EAST EUROPE

Name of Variable (1)

African Value

OECD Value

Foregone Annual Growth

(4) Price of Investment Goods 123 70 0.44% Human Capital (1): Primary School Enrollment 0.42 0.97 1.47% Human Capital (II): Life Expectancy 42 68 2.07% Human Capital (III): Malaria Prevalence 0.80 0.00 1.25% Geography: Fraction of Area in the Tropics 0.85 0.03 1.21% Openness 0.10 0.66 0.67% Public Spending in Consumption 0.16 0.07 0.40% Conflict: Ethno-linguistic Fractionalization 0.58 0.12 0.52%

USING BACE COEFFICIENTS

What to do?What to do?• African CountriesAfrican Countries

– PeacePeace– Institutions/MarketsInstitutions/Markets– Openness Openness

• Rich Countries:Rich Countries:– Change AID Programs: Change AID Programs:

• Focus on R&DFocus on R&D

– Open Markets (especially EU, USA and Japan ‘s Open Markets (especially EU, USA and Japan ‘s agricultural protectionism)agricultural protectionism)

• NGOs:NGOs:– Education (progresa-type programs)Education (progresa-type programs)– Health (doctors without borders)Health (doctors without borders)

Why has Africa Grown So Slowly?

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