Growth escalators and growth convergence
Ejaz Ghani 17 August 2014
Just like the East Asian Tigers, the Lions of Africa are now growing much faster than the developed economies. However, this column shows that the growth escalators in Africa are different than in East Asia. The East Asian Tigers benefitted from a rapidly expanding manufacturing sector. The African Lions are benefitting from increases in productivity in the service sector, while the agricultural sector remains unproductive.
The literature on global growth convergence and divergence is vast and deep. And it is still evolving. Some have argued that global growth is actually diverging across countries. Pritchett (1977) called this “divergence, big time”, whereby the living standards of a few countries pulled away from the rest in the aftermath of the industrial revolution. Others have found evidence in favour of growth convergence.
growth, Africa, convergence
African growth looking forward
Marco Annunziata 16 August 2014
Africa has generated a lot of enthusiasm lately. The cynical view of the continent as a hopeless basket case has been replaced by the lofty narrative of Africa Rising. This column argues that Africa’s progress is impressive, and there is more to the story than a commodity boom. But Africa is at a crossroads. The opportunities are huge, but the road ahead is long, and will require persistent and patient effort from policymakers as well as business.
Views on Africa’s growth prospects have jumped from utter pessimism to extreme enthusiasm. The latter has been centre-stage with the US–Africa Summit hosted in Washington DC from 4–6 August 2014, with the participation of top political and business leaders. My coauthors Todd Johnson and Shlomi Kramer and I have tried to take a sober assessment of Africa’s progress and prospects, looking beyond the current hype and the inevitable frustration that doing business in the region still generates (Annunziata et al. 2014).
development, growth, Africa, human capital, trade, innovation, infrastructure, commodity boom
Rethinking African solar power for Europe
Emanuele Massetti, Elena Ricci 23 July 2014
Concentrated solar power generation in Northern African and Middle Eastern deserts could potentially supply up to 20% of European power demand. This column evaluates the technological, economic, and political feasibility of this idea. Although concentrated solar power is a proven technology that can work at scale, it is currently four or five times more expensive than fossil fuels. Concentrated solar power could play an important role in Europe’s energy mix after 2050, but only if geo-political challenges can be overcome.
The DESERTEC Foundation has suggested that up to 20% of power demand in Europe can be obtained by connecting African deserts to European cities (Figure 1). The idea is to build a large number of concentrated solar power (CSP) plants in Middle Eastern and Northern African (MENA) countries, and to transmit electricity to Europe by means of very efficient high-voltage direct-current cables.
Europe, Africa, climate change, Renewable energy, energy security, Middle East, deserts, solar, photovoltaic, wind, concentrated solar power
British and French educational legacies in Africa
Denis Cogneau, Alexander Moradi 17 May 2014
The quasi-experiment of arbitrary border design allows for causal interpretation of institutional effects across territories. This column presents evidence on the impact of British and French colonial education policies in West Africa. British flexibility and French centralisation resulted in educational attainment differences that persist – across one border – even among some cohorts of the current workforce.
Britain and France followed two very distinct approaches to education in their African colonies (Garner and Schafer 2006).
Development Economic history Education
Africa, institutions, colonialism, West Africa
Newspaper readership, civic attitudes, and economic development: Evidence from the history of African media
Julia Cagé, Valeria Rueda 14 May 2014
African regions where Protestant missionaries were active had indigenous newspapers a century before other regions. This column argues, based on new research, that this difference has had lasting effects. Proximity to a mission that had a printing press in 1903 predicts newspaper readership today. Population density and light density (a proxy for economic development) is also higher today in regions nearer to missions that had printing presses. The results suggest that a well-functioning media – not Protestantism per se – was important for development.
Poor governance due to lack of political accountability is often cited as an explanation for the low level of economic development in sub-Saharan Africa. Lack of political accountability can emerge when voters do not choose their candidates according to their expected performance. In sub-Saharan Africa, voters often use the ethnic profile of a candidate as an informational shortcut for the candidate’s political agenda (Ichino and Nathan 2013). As a consequence, politicians rely on tribal allegiances that deliver the votes of co-ethnics irrespective of performance (Casey 2013).
Development Economic history Institutions and economics Politics and economics
development, democracy, Africa, religion, technology, media, voting, accountability
More to do on measuring hunger
Joachim De Weerdt, Kathleen Beegle, Jed Friedman, John Gibson 18 February 2014
Whereas the Millennium Development Goal of reducing extreme poverty by half was achieved by 2010, the global hunger rate has only fallen by a third since 1990. Differences in survey design may account for part of this discrepancy. This column presents the results of a recent experiment in which households were randomly assigned to different survey designs. These different designs yield vastly different hunger estimates, ranging from 19% to 68% of the population being hungry.
One of the first Millennium Development Goals is to reduce hunger by half between 1990 and 2015. To date, the global hunger count has fallen slightly, from 1 billion in 1990–1992 to 870 million in 2010–2012 (Food and Agriculture Organization 2013). As a proportion of the world’s population, this is just a one-third fall in the hunger rate, from 19% to 13%. In contrast, the other highly visible Millennium Development Goal – reducing extreme poverty by half – was achieved by 2010.
Poverty and income inequality
development, Africa, Poverty, Millennium Development Goals, food, hunger, measurement error, surveys, Tanzania
Why don’t African firms create more jobs?
Leonardo Iacovone, Vijaya Ramachandran 07 February 2014
There is an urgent need for job creation in Africa yet something seems to be stunting firm growth. This column shows that African firms are about 20% smaller than their counterparts in other locations. It suggests small firms put the brake on growth as the burden of dealing with government and labour costs may increase with size, or perhaps as they start facing trust issues between managers and workers.
There is an urgent need for job creation in Africa. Many economies on the continent suffer high rates of under-employment and/or low-productivity employment. In addition, because of demographic factors, many countries anticipate that large numbers of youth will enter the workforce in the near future. This may be beneficial to economic growth but also a potential threat to social stability.
Development Labour markets
Africa, firms, jobs
The value of democracy in the world’s poorest region: Evidence from Kenya’s road building
Ameet Morjaria 05 February 2014
Ethnic favouritism is a longstanding problem in Africa. This column presents new evidence of this phenomenon and how democracy affects it. Data on road building in Kenya confirms strong ethnic favouritism that disappears during periods of democracy.
An enormous literature points to a diverse set of factors behind Africa’s growth tragedy, ranging from bad policies, poor education, and poor infrastructure, to aging leaders, the historic slave trade, and political instability. Historians, political scientists, and economists have all argued that ethnic favouritism – a situation where coethnics benefit from patronage and public policy decisions – has hampered the economic performance of many African countries.
Development Institutions and economics Politics and economics
democracy, Africa, autocracy, ethnic inequality, public finance
With a little help from my friends – FDI in Africa
Holger Görg, Christiane Krieger-Boden, Adnan Seric 10 December 2013
An expansion in the scope of foreign direct investment in sub-Saharan Africa promises to promote development in one of the poorest regions of the world. This column investigates the extent to which working with foreign multinationals enhances the capabilities of African firms. Acting as a supplier to a multinational enterprise improves a firm’s labour productivity, product and process innovation, while buying from a multinational improves only labour productivity. Governments should take advantage of these spillovers by promoting trade.
Foreign direct investment (FDI) and the emergence of multinational firms (MNEs) have proven successful strategies for the growth performance of host countries. In recent years, developing economies have gained substantial shares of such worldwide FDI flows. Now, a “new wave of FDI” has even swept sub-Saharan Africa, one of the poorest regions of the world (Figure 1).
Development International trade
AGOA rules: The intended and unintended consequences of special fabric provisions
Lawrence Edwards, Robert Z. Lawrence 20 November 2013
Preferential import policies that allow developing markets to export to advanced economies are intended to dynamically promote development rather than just provide basic gains from trade. This column argues that the Africa Growth and Opportunities Act achieves the latter but not the former, distorting incentives along the value-added chain. While beneficial, preferential trade deals are not a panacea and are certainly not a replacement for pro-development policies.
The US and EU often claim credit for granting duty-free quota-free access to products from the least developed countries. Such preferential treatment is of interest not only because it might provide one-time benefits in the form of higher incomes and increased employment, but also because trade is often associated with dynamic benefits that lead to faster growth and development.
Development International trade
development, Africa, tariffs, quotas