why has africa grown so slowly? xavier sala-i-martin columbia university
TRANSCRIPT
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
$0
$500
$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
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
1960 1965 1970 1975 1980 1985 1990 1995 2000
Africa Sub-Saharan Africa
Figure 5: Gini Coefficient
0.52
0.54
0.56
0.58
0.6
0.62
0.64
0.66
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Africa Sub-Saharan Africa
Figure 6: Theil Index for Sub-Saharan Africa
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Overall Inequality Across-Country Inequality Witin Country Inequality
Figure 7: Income Distribution in Nigeria
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
$10 $100 $1,000 $10,000
1970 1980 1990 2000
Figure 8: Absolute Consumption Poverty Rates
0%
10%
20%
30%
40%
50%
60%
70%
1970 1975 1980 1985 1990 1995 2000
Per
cent
age
of P
opul
atio
n Li
ving
with
less
than
1$
a da
y
All Africa Sub-Saharan Africa World
Figure 10: Investment Rates
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
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
0
1
2
3
4
5
6
7
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
0
20
40
60
80
100
120
140
160
180
Africa Sub-Saharan Africa North Africa OECD East Asia
Survey of Business LeadersSurvey of Business Leaders
Figure 8: Infrastructures
1.5
2
2.5
3
3.5
4
4.5
5
5.5
South
Afri
ca
Namib
ia
Mau
ritiu
s
Tanz
ania
Seneg
al
Kenya
Camer
oon
Mali
Ethiop
ia
Moz
ambiqu
e
Angol
a
OECD
EAST ASIA
SSA
Human CapitalHuman Capital (1): (1): EducationEducation• School Enrollments are lowSchool Enrollments are low
• Investment in Education does not lead to Investment in Education does not lead to more enrollment: incentivesmore enrollment: incentives
• Keep in mind that the solution of Keep in mind that the solution of education incentives may NOT be in the education incentives may NOT be in the education sector but in other sectors education sector but in other sectors (Labor Market?)(Labor Market?)
• Education of GIRLS has added benefits in Education of GIRLS has added benefits in terms of Health and Fertilityterms of Health and Fertility
Figure 14: Primary School Enrollment
0
0.2
0.4
0.6
0.8
1
Africa Sub-Saharan Africa North Africa OECD East Asia
Survey of Business LeadersSurvey of Business Leaders
Figure 10: Human Capital (Quality of Education)
1.5
2
2.5
3
3.5
4
4.5
5
5.5
South
Afri
ca
Botsw
ana
Namib
ia
Gambia
Mau
ritiu
s
Ghana
Tanz
ania
Nigeria
Seneg
al
Ugand
a
Kenya
Mala
wi
Camer
oon
Mad
agas
car
Mali
Zam
bia
Ethiop
ia
Zim
babw
e
Moz
ambi
que
Chad
Angol
a
MENA
OECD
LATI
N AM
ERICA
EAST ASIA
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
0
10
20
30
40
50
60
70
Africa Sub-Saharan Africa North Africa OECD East Asia
Figure 16: Health (2): Malaria Prevalence
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Africa Sub-Saharan Africa North Africa OECD East Asia
Survey of Business LeadersSurvey of Business Leaders
Figure 11: Human Capital (Health)
1.5
2.5
3.5
4.5
5.5
6.5
South
Afri
ca
Botsw
ana
Namib
ia
Gambia
Mau
ritiu
s
Ghana
Tanz
ania
Nigeria
Seneg
al
Ugand
a
Kenya
Mala
wi
Camer
oon
Mad
agas
car
Mali
Zam
bia
Ethiop
ia
Zim
babw
e
Moz
ambiqu
eCha
d
Angol
a
MENA
OECD
LATI
N AM
ERICA
EAST ASIA
EAST EUROPE
SSA
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
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Africa Sub-Saharan Africa North Africa OECD East Asia
Survey of Business LeadersSurvey of Business Leaders
Figure 1: Property Rights
1.5
2
2.5
3
3.5
4
4.5
South
Afri
ca
Botsw
ana
Namib
ia
Gam
bia
Mau
ritius
Gha
na
Tanza
nia
Niger
ia
Seneg
al
Ugand
a
Kenya
Mal
awi
Camer
oon
Mad
agasc
ar Mal
i
Zambi
a
Ethiop
ia
Zimbab
we
Moz
ambi
que
Chad
Angola
MENA
OECD
LATIN
AM
ERICA
EAST ASIA
EAST EURO
PE
SSA
Survey of Business Leaders. Survey of Business Leaders. Corruption and the Natural Corruption and the Natural Resource CurseResource Curse
Figure 2: Corruption
1.5
2
2.5
3
3.5
4
4.5
5
5.5
South
Afri
ca
Botsw
ana
Namib
ia
Gam
bia
Mau
ritius
Gha
na
Tanza
nia
Niger
ia
Seneg
al
Ugand
a
Kenya
Mal
awi
Camer
oon
Mad
agasc
ar Mal
i
Zambi
a
Ethiop
ia
Zimbab
we
Moz
ambi
que
Chad
Angola
MENA
OECD
LATIN
AM
ERICA
EAST ASIA
EAST EURO
PE
SSA
Survey of Business Leaders: Survey of Business Leaders: Red Tape, Bureaucracy, WasteRed Tape, Bureaucracy, Waste
Figure 3: Government Inefficiencies (Red Tape, Bureaucracy, Waste)
2
2.5
3
3.5
4
4.5
South
Afri
ca
Namib
ia
Mau
ritiu
s
Tanz
ania
Seneg
al
Kenya
Camer
oon
Mali
Ethiop
ia
Moz
ambi
que
Angol
a
OECD
EAST ASIA
SSA
Survey of Business LeadersSurvey of Business Leaders
Figure 5: Overall Institutions (Public and Private)
2.5
3
3.5
4
4.5
5
South
Afri
ca
Namib
ia
Mau
ritiu
s
Tanz
ania
Seneg
al
Kenya
Camer
oon
Mali
Ethiop
ia
Moz
ambiqu
e
Angol
a
OECD
EAST ASIA
SSA
SBL: Market EfficiencySBL: Market Efficiency
• Good Markets Efficiency (fair competition, Good Markets Efficiency (fair competition, no monopolies) no monopolies)
• Labor MarketLabor Market– LawsLaws– MeritocracyMeritocracy– Female DiscriminationFemale Discrimination– Distortions from NPOs and IFIsDistortions from NPOs and IFIs
• Financial Markets EfficiencyFinancial Markets Efficiency– Banking SystemBanking System– Stock MarketsStock Markets– Capital RiskCapital Risk
Survey of Business LeadersSurvey of Business Leaders
Figure 16: Goods Markets and Business Environment
2
2.5
3
3.5
4
4.5
5
South
Afri
ca
Botsw
ana
Namib
ia
Gambia
Mau
ritiu
s
Ghana
Tanz
ania
Nigeria
Seneg
al
Ugand
a
Kenya
Mala
wi
Camer
oon
Mad
agas
car
Mali
Zam
bia
Ethiop
ia
Zim
babw
e
Moz
ambi
que
Chad
Angol
a
MENA
OECD
LATI
N AM
ERICA
EAST ASIA
EAST EUROPE
SSA
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
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Africa Sub-Saharan Africa North Africa OECD East Asia
Excessive Public Spending and Excessive Public Spending and “bad government”“bad government”
Figure 19: Government Consumption Share of GDP
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
Africa Sub-Saharan Africa North Africa OECD East Asia
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
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Africa Sub-Saharan Africa North Africa OECD East Asia
Survey of Business LeadersSurvey of Business Leaders
Figure 23: Security
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
South
Afri
ca
Botsw
ana
Namib
ia
Gambia
Mau
ritiu
s
Ghana
Tanz
ania
Nigeria
Seneg
al
Ugand
a
Kenya
Mala
wi
Camer
oon
Mad
agas
car
Mali
Zam
bia
Ethiop
ia
Zim
babw
e
Moz
ambi
que
Chad
Angol
a
MENA
OECD
LATI
N AM
ERICA
EAST ASIA
EAST EUROPE
SSA
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 – Promote a Market Environment and a Business FavbricPromote a Market Environment and a Business Favbric
• Rich Countries/Institutions:Rich Countries/Institutions:– Change AID Programs: Change AID Programs:
• Focus on Health R&DFocus on Health R&D• RADICAL CHANGE: ask, penalize if do wrong, local answers…RADICAL CHANGE: ask, penalize if do wrong, local answers…• Shift from HUGE AID (Sachs, Blair, Bono, …) to LEARNINGShift from HUGE AID (Sachs, Blair, Bono, …) to LEARNING• Understand the distortions you are causingUnderstand the distortions you are causing• Bring BUSINESS!!!Bring BUSINESS!!!
– Open Markets (especially EU, USA and Japan ‘s agricultural Open Markets (especially EU, USA and Japan ‘s agricultural protectionism)protectionism)
• NGOs:NGOs:– LearningLearning– Focus on what works (ie, progresa-type programs)Focus on what works (ie, progresa-type programs)– Health (doctors without borders)Health (doctors without borders)– Bring BUSINESS!!!Bring BUSINESS!!!