Jared Barnett David Alexander Nancy Du Varun Sharma

 1960s - 7 African countries predicted to have GDP growth over 7% Negative growth from  Lower GDP growth than other areas - S. Asia & Latin America  1980: Africa comparable to S. Asia Africa’s GDP has declined whereas S. Asia has nearly doubled Africa’s % of world exports was 4x S. Asia, now halved, as S. Asia has doubled Lower life expectancy and lower avg. caloric intake  Africa Dummy Variable – ignores differences among countries  Economic Policy & Indicators High black market premiums & budget deficits; Low financial liquidity Low investment in human capital: education & training

Geography & Diversity  Fractionalization: 14/15 Most ethnically diverse. 54 Countries w/ avg. of 4 neighbors. Additional Linguistic Diversity  Varying Natural Endowments Coastal v. Land-Locked (40%) Resource Rich v. Scarce  Low growth includes all country types: Nigeria: coastal and oil producing but highly volatile growth patterns remain

 Lingering effects of colonialism British v. French, et al. Hands off v. Hands On  Corruption and Rent Seeking  Conflicts & Volatility – Emerging Democracies Political assassinations & civil wars Low Levels of FDI and International Trade

Causes… I. Geographic and Demographic Concerns II. Colonialism and Current Politics III. Ethnic Divisions IV. Poor Economic Policies

Geographic and Demographic Concerns I. Fragmentation A). Small Country Size B). Migratory Trends C). Intra-Continental Trade II. Costs of Fragmentation A). Unequal Resource Distribution B). Loss of Scale

 State Building and Metropole Identities British Colonization French Colonization  Legitimate vs. Illegitimate states Rent Seeking Neopatrimonialism (Personal Rule)  Ethnic Divisions (colonial roots )

 “ethnically polarized societies are more likely to select socially sub-optimal policies”  Wars of Attrition Compounds the effects of other causes of the growth tragedy  economic policies  public goods – schooling, financial depth, telephones/worker  Rent Seeking Corruption and Bribes Exchange Rate example “Common Pool” Problem

 Generally:  Excessive gov spending, Lack of Openness to International Trade, Low investment in human capital  Specifically: Landlocked and Resource Scarce States  Majority of African population  Not engaging in trade with neighbors  Policies that raise the cost of human capital and prevent international trade (ie Monopolies)  Coastal Resource Scarce States  Lack of openness to international Trade  Resource Rich States  Dutch Disease  Macroeconomic Volatility  Ineffective Public Spending

 Since 1994 GDP growth has approached 5%, & 6% from , including all country types  Contributing factors rising commodities prices increased international debt relief  Ethiopia –climate conditions + higher prices for exports Growth masks underlying problems – volatility remains  Solutions to reduce volatility Leverage aid in 2 nd stage of democratic growth  Better leadership in development programs  Promote regional collaboration  Neighbor Multiplier