Why is Africa poor and does aid work

Why is Africa poor and does aid work - 126 CHAPTER 6...

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126 CHAPTER 6 Endogenous Growth and Convergence to have better fundamentals and should benefit from higher growth. These numbers show that being poor does not guarantee growth. But if these poor nations could shift their steady states (and Table 6.1 suggests that government policy can have both positive and negative influences on the steady state), then their growth prospects would improve. KEY POIN1 Econometric studies findthatinvestment,health,education, initialincome,andopenness totradeare importantdeterminants ofa country'ssteadystate. Why Is Africa So Poor? Economic growth in Africa (particularly sub-Saharan Africa) has been continually disappointing. Figure 6.11 shows growth in real GDP per capita for a range of countries since 1820.For the entire period, Africa has been both the poorest and often the slow- est growing region so that, as a result, 15 out of the 20 poorest nations in the world are in Africa. Although there have been some success stories, most noticeably Botswana, the region has remained a challenge to policymakers. Our steady state analysis helps to explain why Africa has seen such poor growth. Africa scores poorly on many of the key determinants of the steady state-low invest- ment, low educational achievement, and low scores on measures of social infrastruc- ture. Moreover, Africa's strong protectionist policies have limited its ability to show convergence. But why has Africa had such low investment and consistently inappropri- ate government policies? 199r2002 I 1~71-92 i i 1i51-70 I I 1~14-50 I j i I I i I i I I I 2 3 GDP growth ("!o) 1871-1913 1820-70 -1 0 ! i I I I I I I I . I I ",wo.J I OAfriC ~ I DAsia . tmLatin me rica I OW. E rope I ' I i I I 4 5 6 FI6 URE 6. 11 Performance of majoregions 1820-2002 (1990$GDP percapita). Africa's poor economic performance has been a persistent feature of the world economy. Source: Maddison, Monitoring the World Economy 1820-1992; OECD and IMF WEO Database (2003).
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6.5 Why IsAfrica So Poor? 127 ETHNO-LiNGUISTIC DIVERSITY One explanation for Africa's poor growth performance that has been the subject of much research is its ethno-linguistic diversity. Many African countries are composed of several large cultural groups, each with its own language and practices. In part this is the legacy of European colonialism, which at the end of the nineteenth century created national boundaries that served European needs rather than boundaries that created ethnic homogeneity. Ethno-linguistically diverse nations tend to have poor government policy. Such po- larized societies may be more prone to competitive rent seeking-each group tries to extract resources from other ethnic groups-and will find it more difficult to reach agreement over public goods (for instance, the location of roads and transport routes). This in turn leads to bad social infrastructure because it produces a gap between the re-
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This note was uploaded on 10/02/2010 for the course INTB 3353 taught by Professor Prodan during the Spring '10 term at University of Houston-Victoria.

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Why is Africa poor and does aid work - 126 CHAPTER 6...

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