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

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$500

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$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

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1960 1965 1970 1975 1980 1985 1990 1995 2000


Figure 5: Gini Coefficient

0.52

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0.58

0.6

0.62

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0.66

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Figure 6: Theil Index for Sub-Saharan Africa

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Overall Inequality Across-Country Inequality Witin Country Inequality

Figure 7: Income Distribution in Nigeria

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Figure 8: Absolute Consumption Poverty Rates

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1970 1975 1980 1985 1990 1995 2000

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All Africa Sub-Saharan Africa World

Figure 10: Investment Rates

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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

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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

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Africa Sub-Saharan Africa North Africa OECD East Asia

Survey of Business LeadersSurvey of Business Leaders

Figure 8: Infrastructures

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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

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Figure 10: Human Capital (Quality of Education)

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OECD

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ERICA

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EAST EUROPE

SSA

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

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Figure 16: Health (2): Malaria Prevalence

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Figure 11: Human Capital (Health)

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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

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Figure 1: Property Rights

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OECD

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ERICA

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PE

SSA

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

Figure 2: Corruption

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

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Figure 5: Overall Institutions (Public and Private)

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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

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

Figure 19: Government Consumption Share of GDP

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Figure 16: Goods Markets and Business Environment

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• 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

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Figure 23: Security

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Name of Variable (1)

African Value

(2)

OECD Value

(3)

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)

Documents

Why has Africa Grown So Slowly?