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Is Africa’s Recent Growth Fragile?

Is Africa’s Recent Growth Fragile?. Topic 1: Structural Change Old and New National Graduate Institute For Policy Studies IDTP Fall 2012 John Page. Africa’s Growth “Turn Around”. Since 1995 Africa has grown at rates exceeding 4 percent per year.

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Is Africa’s Recent Growth Fragile?

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  1. Is Africa’s Recent Growth Fragile? Topic 1: Structural Change Old and New National Graduate Institute For Policy Studies IDTP Fall 2012 John Page

  2. Africa’s Growth “Turn Around” • Since 1995 Africa has grown at rates exceeding 4 percent per year. • The region was largely untouched by the global financial crisis of 2007/2008. • Economists have mistakenly predicted turning points in Africa’s growth before. • How robust is growth this time? • Well, let’s use old and new structuralism to try to answer that question.

  3. Africa’s Growth Turn-Around

  4. Sectors, Products and Firms in Africa’s Recent Growth • Sectors: • Productivity differentials • The “structural deficit” • Growth reducing structural change • Products: • Diversity • Sophistication • Firms: • Firm size and productivity

  5. Africa has the largest differences in productivity Differences in Labor Productivity Between Sectors Source: McMillan and Rodrik (2011); author’s calculations

  6. Africa’s “Structural Deficit” • Notes: Africa low income sample ETH, MWI, GHA, KEN, MAD, MOZ, SEN, TZA • Africa middle income sample MUS, ZAF • Africa resource rich economies BOT, LES, NGA, NMB, ZAF • Sources: McMillan and Rodrik (2011) data base, World Bank WDI database, Timmer and de • Vries (2008) database. Author’s calculations

  7. The growth potential of Africa’s dualism Structural Change and Growth (percentage change)

  8. Decomposing Productivity Change Δ Y = Σ θi ,t-kΔ y i, t+ Σ y i, tΔ θi, t Overall = Within Sector + Structural Productivity Productivity Change Change Change

  9. Yields a worrisome result “Perverse” structural change has slowed productivity growth

  10. “Out of Africa”:Industrial development lags Selected Indicators of Industrial Development, 2005 - 2008

  11. “Out of Africa”:Production has become less diverse... Production Intensities by Level of Sophistication and Country Type Low Sophistication Products

  12. “Out of Africa”:...and less sophisticated Production Intensities by Level of Sophistication and Country Type High Sophistication Products

  13. Productivity and Firm Size in 10 African Countries Note: The graph shows predicted value added per worker based on a regression of log value added per worker on a third-order polynomial in log employment and country dummies. The predictions are normalized at 100 for a firm with five employees.

  14. What are the Implications of these Trends? • Is lack of structural change a cause for concern? • What has sustained growth in the absence of structural change? • What sectors should drive structural change? • What policy options are available to African governments to accelerate structural change? • What can/should aid agencies do?

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