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Drivers of Structural Transformation: The Case of the Manufacturing Sector in Africa
(Elsevier, 2017-11) Mijiyawa, Abdoul' Ganiou
This paper analyzes the driving factors of manufacturing development in Africa. Using the system-GMM technique with four-year average panel data over the period 1995–2014, including 53 African countries, the paper finds four main results. (1) There is a U-shaped relationship between the manufacturing share of GDP and per capita GDP. (2) Exchange rate depreciation stimulates Africa’s manufacturing sector. (3) Good governance, especially a low level of corruption and better government effectiveness contribute to Africa’s manufacturing development. (4) The size of domestic market positively affects the manufacturing share of GDP. On the other hand, the paper finds no significant effects of FDI and urbanization on manufacturing development. The implication of these findings is that improving the level of competitiveness, expanding the size of domestic market, combating corruption as well as improving government effectiveness are key for Africa’s manufacturing sector development. Moreover, the U-shaped relationship between the manufacturing share of GDP and per capita GDP, implies that African countries should not expect industrialization to automatically happen with income increase, but rather, they should proactively tackle key obstacles to the development of the manufacturing sector.
Explaining Ethiopia’s Growth Acceleration—The Role of Infrastructure and Macroeconomic Policy
(Elsevier, 2017-08) Moller, Lars Christian; Wacker, Konstantin M.
Ethiopia has experienced an impressive growth acceleration over the past decade. This was achieved on the back of an economic strategy emphasizing public infrastructure investment supported by heterodox macro-financial policies. This paper identifies the drivers of Ethiopia’s recent growth episode and examines the extent to which they were typical or unique. It combines country-specific information with the results of a cross-country panel regression model. We find that Ethiopia’s growth is explained well by factors correlating with growth in a broad range of countries in recent decades, including public infrastructure investment, restrained government consumption, and a conducive external environment. On the other hand, we argue that the policy mix that supported very high levels of public investment in Ethiopia was, to some extent, unique. Interestingly, macroeconomic imbalances due to this heterodox policy mix only moderately held back growth which helps explain why Ethiopia was able to grow so fast in spite of their presence: their negative effects were quantitatively much less important than the positive growth drivers they helped to achieve. The results suggest that “getting infrastructure right” may outweigh moderate shortcoming in the macro framework at early stages of development. We further relate this country-specific finding to the recent growth literature.