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Replicating Sachs and Warner: Sources of Slow Growth in African Economies Graham A. Davis Division of Economics and Business Colorado School of Mines York,

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Presentation on theme: "Replicating Sachs and Warner: Sources of Slow Growth in African Economies Graham A. Davis Division of Economics and Business Colorado School of Mines York,"— Presentation transcript:

1 Replicating Sachs and Warner: Sources of Slow Growth in African Economies Graham A. Davis Division of Economics and Business Colorado School of Mines York, England September 2011

2 The Sachs and Warner Resource Curse Data (primary exports/GDP, 1970)

3 Citations of SW Resource Curse Research as of 6/24/2011

4 Sources of Slow Growth in African Economies (JAE 1997) Three Groups of Developing Economies Sub-Saharan Africa Fast Growth Seven (Indonesia, Malaysia, Hong Kong, Singapore, Thailand, Taiwan, S. Korea) All Others (the average non-African developing country)

5 Why the Slower Growth in Africa? Average Real (PPP) per Capita Growth Sub-Saharan Africa0.80% per yr Fast Growth Seven5.83% per yr All Other Developing Economies GD: 1.38% per yr SW: 1.76% per yr

6 Why the Slower Growth in Africa? Geography? –Landlocked, tropics, resource curse Demographics? –Rapid population growth, poor health Policy? – Low government savings, infrequent trade openness, poor institutional quality Special Africa Theory? –Africa dummy

7 African Growth Lag v. Average Other Developing Country Geography and Demography Effects SW Estimate Replication Estimate Tropics-0.2%-0.25% Landlocked-0.1%-0.14% Resource Curse-0.2%+0.03% Life Expectancy-0.9%-0.97% Population Growth-0.6%-0.51% TOTAL-2.0%-1.83%

8 African Growth Lag v. Average Other Developing Country Policy EffectsSW Estimate Replication Estimate Trade Openness-0.9%-0.42% Government Saving+0.2%+0.22% Institutional Quality-0.0%-0.02% TOTAL-0.7%-0.22%

9 Summary of African Growth Lag v. Average Other Developing Country Effect SW Estimate Replication Estimate Actual SW/GD Catch up+1.0%+1.52%na Geography-0.5%-0.35%na Demography-1.5%-1.48%na Policy-0.7%-0.22%na TOTAL-1.8%-0.54%-0.96/-0.58 NB: regressions only include 20 of the 46 SSA countries, with sample average growth of 0.46 v. SSA growth of ~ 0.80.

10 African Growth Lag from Not Adopting Fast Country Policies Policy EffectSW Estimate Replication Estimate Trade Openness-2.7%-3.15% Government Saving-0.1%-0.10% Institutional Quality-0.6%-0.66% TOTAL-3.4%-3.91%

11 Aside: African Growth Lag v. Average Fast Growth Country Effect SW Estimate Replication Estimate Actual SW/GD Catch upna+1.42% Geographyna-0.65%na Demographyna-2.21%na Policyna-3.73%na TOTALna-5.17%-5.03/-5.03

12 …our final estimate is that a country with African structure and LDC policies could have grown at 1.4% (GD: 1.0%) per year [rather than the realized growth rate of 0.80% per year]. …we estimate that Africa could have achieved per capita growth of 4.3% (GD: 4.7%) per annum if it had followed fast- growth policies.

13 Our regression evidence suggests that part of the explanation for Africas slow growth lies with natural factors… However, the evidence also suggests that basic economic policies such as openness to international trade, government saving and market-supporting institutions have had an even larger quantitative impact on economic growth rates. GD:True if one compares African policies to fast-growing country policies. Not true if one compares African policies to other developing country policies. SW Conclusion


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