Sector Growth and the Dual Economy Model: Evidence from Cote D'Ivoire, Ghana, and Zimbabwe

29 Pages Posted: 20 Apr 2016

See all articles by Niels-Hugo Blunch

Niels-Hugo Blunch

Washington and Lee University; IZA Institute of Labor Economics

Dorte Verner

World Bank - Latin America and Caribbean Region

Date Written: September 30, 1999

Abstract

Focusing mainly on industry has not been optimal policy in Cote d'Ivoire, Ghana, and Zimbabwe. For maximum economywide growth, it would have been better to balance policies to facilitate growth in all three sectors: Agriculture, industry, and services.

Blunch and Verner analyze and compare sectoral growth in three African economies - Cote d'Ivoire, Ghana, and Zimbabwe - since 1965. They extend the classic dual economy - the agriculture and industry sectors - by adding the services sector. For all three countries, they find at least one statistically significant long-run relationship for sectoral GDP. This indicates a large degree of interdependence in long-run growth among the three sectors. This also provides evidence against the basic dual economy model, which implies that a long-run relationship cannot exist between agricultural and industrial output.

Analysis of the impulse response and analysis of short-run sectoral growth support the results on the interdependence of sectoral growth. Both imply that a positive link exists between growth in industry and growth in agriculture. Their findings contradict the literature on the dual economy - and suggest that more attention should be paid to inter-sectoral dynamics and dependencies in Sub-Saharan Africa. Why? Because an adverse shock in, say, agriculture after a drought is likely to have an adverse impact on other economic sectors. Policymakers should try to accommodate not only the initial shock in agriculture but also its adverse effects in other sectors. They find that focusing mainly on industry was not optimal policy in Cote d'Ivoire, Ghana, and Zimbabwe. For maximum economywide growth, it would have been better to balance policies to include all three sectors: Agriculture, industry, and services.

This paper is a product of Human Development 3, Africa Technical Families.

Suggested Citation

Blunch, Niels-Hugo and Verner, Dorte, Sector Growth and the Dual Economy Model: Evidence from Cote D'Ivoire, Ghana, and Zimbabwe (September 30, 1999). Available at SSRN: https://ssrn.com/abstract=620549

Niels-Hugo Blunch

Washington and Lee University ( email )

Department of Economics
Lexington, VA 24450
United States

HOME PAGE: http://www.wlu.edu/williams-school/economics/faculty-and-staff/profile?ID=x258

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Dorte Verner (Contact Author)

World Bank - Latin America and Caribbean Region ( email )

1818 H Street NW
Washington, DC 20433
United States

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