Africa's Growth Tragedy: A Retrospective, 1960-89

44 Pages Posted: 20 Apr 2016

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Date Written: August 1995

Abstract

Problems associated with Sub-Saharan Africa's slow growth are low school attainment, political instability, poorly developed financial systems, large black-market exchange-rate premia, large government deficits, and inadequate infrastructure. Improving policies alone boosts growth substantially. But if neighboring countries adopt a policy change together, the effects on growth are more than double what they would have been if one country had acted alone.

Africa's economic history since 1960 fits the classical definition of tragedy: potential unfulfilled, with disastrous consequences.

Easterly and Levine use one methodology - cross-country regressions - to account for Sub-Saharan Africa's growth performance over the past 30 years and to suggest policies to promote growth over the next 30 years.

They statistically quantify the relationship between long-run growth and a wider array of factors than any previous study. They consider such standard variables as initial income to capture convergence effects, schooling, political stability, and indicators of monetary, fiscal, trade, exchange rate, and financial sector policies. They also consider such new measures as infrastructure development, cultural diversity, and economic spillovers from neighbors' growth. Their analysis:

- Improves substantially on past attempts to account for the growth experience of Sub-Saharan African countries. - Shows that low school attainment, political instability, poorly developed financial systems, large black-market exchange-rate premia, large government deficits, and inadequate infrastructure are associated with slow growth. - Finds that Africa's ethnic diversity tends to slow growth and reduce the likelihood of adopting good policies. - Identifies spillovers of growth performance between neighboring countries. The spillover effects of growth have implications for policy strategy. Improving policies alone boosts growth substantially, but if neighboring countries act together, the effects on growth are much greater. Specifically, the results suggest that the effect of neighbors' adopting a policy change is 2.2 times greater than if a single country acted alone.

This paper - a joint product of the Macroeconomics and Growth Division and the Finance and Private Sector Development Division, Policy Research Department - is part of a larger effort in the department to understand the link between policies and growth. The study was funded by the Bank's Research Support Budget under the research project Patterns of Growth (RPO 678-26).

Suggested Citation

Easterly, William and Levine, Ross Eric, Africa's Growth Tragedy: A Retrospective, 1960-89 (August 1995). World Bank Policy Research Working Paper No. 1777. Available at SSRN: https://ssrn.com/abstract=569226

William Easterly

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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