Economics 172 Issues in African Economic Development Professor Ted Miguel Department of Economics University of California, Berkeley
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Econ
omic
s 17
2Is
sues
in A
frica
n E
cono
mic
Dev
elop
men
t
Pro
fess
or T
ed M
igue
lD
epar
tmen
t of E
cono
mic
sU
nive
rsity
of C
alifo
rnia
, Ber
kele
y
Econ
omic
s 17
2Is
sues
in A
frica
n E
cono
mic
Dev
elop
men
t
Lect
ure
22 –
Apr
il 12
, 200
7
Eco
nom
ics
172:
Lec
ture
22
3
Eco
nom
ics
172:
Lec
ture
22
4
Out
line:
(1)
Eas
terly
(200
1) o
n st
ruct
ural
adj
ustm
ent
(2)
Ber
ry (1
997)
on
Gha
na(3
)Tr
ade
rule
s an
d de
velo
pmen
t: th
e ca
se o
f cot
ton
Eco
nom
ics
172:
Lec
ture
22
5
The
Cas
e of
Gha
na in
the
1980
s-19
90s
•S
truct
ural
adj
ustm
ent r
efor
ms
in G
hana
, 198
0s:
–A
gric
ultu
ral p
rice
cont
rols
redu
ced,
agr
icul
tura
l m
arke
ting
boar
ds g
radu
ally
dow
nsiz
ed o
r di
sban
ded
(incl
udin
g “C
ocob
od”)
–Fo
reig
n ex
chan
ge c
ontro
ls a
nd ta
riffs
redu
ced
–S
tate
bur
eauc
rats
and
indu
stria
l sec
tor w
orke
rs la
id
off,
stat
e en
terp
rises
dow
nsiz
ed o
r priv
atiz
ed
Eco
nom
ics
172:
Lec
ture
22
6
The
Cas
e of
Gha
na in
the
1980
s-19
90s
•S
truct
ural
adj
ustm
ent r
efor
ms
in G
hana
, 198
0s:
–A
gric
ultu
ral p
rice
cont
rols
redu
ced,
agr
icul
tura
l m
arke
ting
boar
ds g
radu
ally
dow
nsiz
ed o
r di
sban
ded
(incl
udin
g “C
ocob
od”)
–Lo
st m
onop
oly
over
cof
fee
and
nuts
in 1
991
–M
ultip
le c
ocoa
buy
ers
allo
wed
sta
rting
in 1
993,
to
day
ther
e ar
e 18
lice
nsed
priv
ate
sect
or b
uyer
s–
Coc
obod
staf
f 48,
000
(!) in
198
7 10
,000
toda
y
Eco
nom
ics
172:
Lec
ture
22
7
The
Cas
e of
Gha
na in
the
1980
s-19
90s
•S
truct
ural
adj
ustm
ent r
efor
ms
in G
hana
, 198
0s:
–A
gric
ultu
ral p
rice
cont
rols
redu
ced,
agr
icul
tura
l m
arke
ting
boar
ds g
radu
ally
dow
nsiz
ed o
r di
sban
ded
(incl
udin
g “C
ocob
od”)
–Lo
st m
onop
oly
over
cof
fee
and
nuts
in 1
991
–M
ultip
le c
ocoa
buy
ers
allo
wed
sta
rting
in 1
993,
to
day
ther
e ar
e 18
lice
nsed
priv
ate
sect
or b
uyer
s–
Coc
obod
staf
f 48,
000
(!) in
198
7 10
,000
toda
y–
Pric
es p
aid
to fa
rmer
s up
dra
mat
ical
ly–
Ivor
y C
oast
inst
abili
ty b
oost
ed w
orld
coc
oa p
rices
Eco
nom
ics
172:
Lec
ture
22
8
Stru
ctur
al A
djus
tmen
t Im
pact
s
•P
ossi
ble
bene
fits
of S
truct
ural
Adj
ustm
ent i
n G
hana
:–
Eco
nom
ic g
row
th in
crea
sed
(bec
omin
g sl
ight
ly
posi
tive,
1-2
% a
nnua
l per
cap
ita g
row
th).
Ave
rage
pe
r cap
ita g
row
th fr
om 1
961-
1983
was
-1.6
%–
Agr
icul
tura
l pro
duct
ion
bega
n gr
owin
g ag
ain
–Im
ports
and
exp
orts
(inc
ludi
ng in
agr
icul
ture
) gre
w,
e.g.
fres
h fru
it fo
r Eur
opea
n m
arke
ts–
Infla
tion
fell
to lo
w le
vels
–B
udge
t def
icits
redu
ced
–G
row
th in
“civ
il so
ciet
y”, c
ivic
org
aniz
atio
ns–
Pol
itica
l dem
ocra
tizat
ion
(may
not
be
caus
al)
Eco
nom
ics
172:
Lec
ture
22
9
Ber
ry (1
997)
on
agric
ultu
re in
cen
tral G
hana
•B
erry
stu
dies
the
Kum
awu
regi
on, i
n A
shan
ti te
rrito
ry.
Onc
e co
coa
farm
ers,
rece
ntly
tom
ato
farm
ers
•D
id S
truct
ural
Adj
ustm
ent “
wor
k”in
Gha
na?
For
who
m?
Eco
nom
ics
172:
Lec
ture
22
10
Ber
ry (1
997)
on
agric
ultu
re in
cen
tral G
hana
•B
erry
stu
dies
the
Kum
awu
regi
on, i
n A
shan
ti te
rrito
ry.
Onc
e co
coa
farm
ers,
rece
ntly
tom
ato
farm
ers
•D
id S
truct
ural
Adj
ustm
ent “
wor
k”in
Gha
na?
For
who
m?
(1) M
ore
expo
sure
to m
arke
t pric
e flu
ctua
tions
(2) L
ess
acce
ss to
form
al c
redi
t in
rura
l are
as
Eco
nom
ics
172:
Lec
ture
22
11
Ber
ry (1
997)
on
agric
ultu
re in
cen
tral G
hana
•B
erry
stu
dies
the
Kum
awu
regi
on, i
n A
shan
ti te
rrito
ry.
Onc
e co
coa
farm
ers,
rece
ntly
tom
ato
farm
ers
•D
id S
truct
ural
Adj
ustm
ent “
wor
k”in
Gha
na?
For
who
m?
(1) M
ore
expo
sure
to m
arke
t pric
e flu
ctua
tions
(2) L
ess
acce
ss to
form
al c
redi
t in
rura
l are
as(3
) “La
nd p
rope
rty ri
ghts
”ref
orm
s la
rgel
y un
succ
essf
ul
Eco
nom
ics
172:
Lec
ture
22
12
Ber
ry (1
997)
on
agric
ultu
re in
cen
tral G
hana
•B
erry
stu
dies
the
Kum
awu
regi
on, i
n A
shan
ti te
rrito
ry.
Onc
e co
coa
farm
ers,
rece
ntly
tom
ato
farm
ers
•D
id S
truct
ural
Adj
ustm
ent “
wor
k”in
Gha
na?
For
who
m?
(1) M
ore
expo
sure
to m
arke
t pric
e flu
ctua
tions
(2) L
ess
acce
ss to
form
al c
redi
t in
rura
l are
as(3
) “La
nd p
rope
rty ri
ghts
”ref
orm
s la
rgel
y un
succ
essf
ul
(4) E
cono
mic
gro
wth
stil
l slo
w o
n th
e co
ntin
ent a
s a
who
le
(the
refo
rms
can’
t be
*tha
t* s
ucce
ssfu
l)
Eco
nom
ics
172:
Lec
ture
22
13
Ber
ry (1
997)
on
agric
ultu
re in
cen
tral G
hana
•B
erry
stu
dies
the
Kum
awu
regi
on, i
n A
shan
ti te
rrito
ry.
Onc
e co
coa
farm
ers,
rece
ntly
tom
ato
farm
ers
•D
id S
truct
ural
Adj
ustm
ent “
wor
k”in
Gha
na?
For
who
m?
(1) M
ore
expo
sure
to m
arke
t pric
e flu
ctua
tions
(2) L
ess
acce
ss to
form
al c
redi
t in
rura
l are
as(3
) “La
nd p
rope
rty ri
ghts
”ref
orm
s la
rgel
y un
succ
essf
ul
(4) E
cono
mic
gro
wth
stil
l slo
w o
n th
e co
ntin
ent a
s a
who
le
(the
refo
rms
can’
t be
*tha
t* s
ucce
ssfu
l)(5
) An
assa
ult o
n na
tiona
l sov
erei
gnty
?
Eco
nom
ics
172:
Lec
ture
22
14
Eas
terly
(200
1) o
n fa
iled
refo
rms
in A
frica
•C
ount
ries
rece
ived
doz
ens
of lo
ans
with
out a
ctua
lly
impl
emen
ting
man
y re
form
s (e
.g. Z
ambi
a, Iv
ory
Coa
st)
--A
frica
n co
untri
es re
ceiv
ed 6
IMF
Stru
ctur
al
Adj
ustm
ent l
oans
on
aver
age
in th
e 19
80s
Eco
nom
ics
172:
Lec
ture
22
15
Map
of A
frica
18 S
AP
loan
s19
80-1
994
desp
ite h
uge
budg
et d
efic
it
12+
SA
P lo
ans
1980
s, 1
990s
de
spite
hig
h in
flatio
n
Eco
nom
ics
172:
Lec
ture
22
16
•C
ount
ries
rece
ived
doz
ens
of lo
ans
with
out a
ctua
lly
impl
emen
ting
man
y re
form
s (e
.g. Z
ambi
a, Iv
ory
Coa
st)
--A
frica
n co
untri
es re
ceiv
ed 6
IMF
Stru
ctur
al
Adj
ustm
ent l
oans
on
aver
age
in th
e 19
80s
•Le
nder
s (li
ke th
e W
orld
Ban
k) h
ave
ince
ntiv
es to
mak
e la
rge
loan
s, b
ut fe
w in
cent
ives
to c
ondi
tion
on re
form
s,
or to
car
ry o
ut s
erio
us e
valu
atio
ns o
f the
ir pr
ogra
m
Eas
terly
(200
1) o
n fa
iled
refo
rms
in A
frica
Eco
nom
ics
172:
Lec
ture
22
17
•C
ount
ries
rece
ived
doz
ens
of lo
ans
with
out a
ctua
lly
impl
emen
ting
man
y re
form
s (e
.g. Z
ambi
a, Iv
ory
Coa
st)
--A
frica
n co
untri
es re
ceiv
ed 6
IMF
Stru
ctur
al
Adj
ustm
ent l
oans
on
aver
age
in th
e 19
80s
•Le
nder
s (li
ke th
e W
orld
Ban
k) h
ave
ince
ntiv
es to
mak
e la
rge
loan
s, b
ut fe
w in
cent
ives
to c
ondi
tion
on re
form
s,
or to
car
ry o
ut s
erio
us e
valu
atio
ns o
f the
ir pr
ogra
ms
--Lo
ans
are
lucr
ativ
e fo
r loc
al ru
lers
--IM
F/W
B o
ffici
als
get p
rom
oted
by
“mov
ing
mon
ey”
--It
is e
mba
rras
sing
to a
dmit
prev
ious
loan
s w
aste
d--
Is c
ondi
tiona
lity
a P
R p
loy?
Are
loan
s po
litic
al to
ols?
Eas
terly
(200
1) o
n fa
iled
refo
rms
in A
frica
Eco
nom
ics
172:
Lec
ture
22
18
•Th
ere
is b
asic
ally
no
cros
s-co
untry
em
piric
al e
vide
nce
that
incr
ease
d fo
reig
n ai
d im
prov
es e
cono
mic
pe
rform
ance
in le
ss d
evel
oped
cou
ntrie
s (d
espi
te
clai
ms
by J
eff S
achs
and
oth
ers)
Eas
terly
(200
1) o
n fa
iled
refo
rms
in A
frica
Eco
nom
ics
172:
Lec
ture
22
19
•Th
ere
is b
asic
ally
no
cros
s-co
untry
em
piric
al e
vide
nce
that
incr
ease
d fo
reig
n ai
d im
prov
es e
cono
mic
pe
rform
ance
in le
ss d
evel
oped
cou
ntrie
s (d
espi
te
clai
ms
by J
eff S
achs
and
oth
ers)
•Th
e S
achs
ver
sus
Eas
terly
deb
ate
on th
e lik
ely
succ
ess
of la
rge
fore
ign
aid
incr
ease
s--
Eas
terly
’sm
ain
poin
t: hu
ndre
ds o
f bill
ions
of d
olla
rs
have
bee
n le
nt o
r giv
en to
Afri
can
coun
tries
ove
r the
pa
st 4
0 ye
ars,
and
gro
wth
rem
ains
slo
w. I
n co
ntra
st
Chi
na a
nd In
dia
are
grow
ing
larg
ely
with
out f
orei
gn a
id
Eas
terly
(200
1) o
n fa
iled
refo
rms
in A
frica
Eco
nom
ics
172:
Lec
ture
22
20
•In
fact
fore
ign
aid
may
hav
e ne
gativ
e ef
fect
s on
ec
onom
ic p
olic
y, lo
cal p
oliti
cs, a
nd u
ltim
atel
y gr
owth
in
the
long
-run
:
Leon
ard
and
Stra
uss
(200
3) o
n de
bt a
nd a
id
Eco
nom
ics
172:
Lec
ture
22
21
•In
fact
fore
ign
aid
may
hav
e ne
gativ
e ef
fect
s on
ec
onom
ic p
olic
y, lo
cal p
oliti
cs, a
nd u
ltim
atel
y gr
owth
in
the
long
-run
:
“Ove
r tim
e, fo
reig
n ai
d al
so c
ontri
bute
s to
wea
k st
ates
. R
athe
r tha
n de
velo
ping
dom
estic
ally
orie
nted
in
stitu
tions
, Afri
ca’s
sta
te o
ffici
als
orie
nt th
eir a
ctio
ns
exte
rnal
ly. …
Wes
tern
aid
is s
omet
imes
thou
ght o
f as
a re
stor
ativ
e re
spon
se to
col
onia
lism
and
the
slav
e tra
de. H
owev
er, A
frica
’s h
igh
leve
ls o
f OD
A [o
vers
eas
deve
lopm
ent a
ssis
tanc
e] h
ad e
ffect
ivel
y ex
tend
ed
colo
nial
pat
tern
s of
gov
erna
nce.
” (pa
ge 3
0)
Leon
ard
and
Stra
uss
(200
3) o
n de
bt a
nd a
id
Eco
nom
ics
172:
Lec
ture
22
22
•Fo
reig
n ai
d is
onl
y on
e pa
rt of
the
over
all r
elat
ions
hip
betw
een
rich
coun
tries
and
poo
r cou
ntrie
s
•A
cces
s to
oth
er c
ount
ries’
mar
kets
thro
ugh
trade
is
anot
her i
mpo
rtant
asp
ect o
f the
rela
tions
hip
Trad
e, a
id, a
nd d
evel
opm
ent
Eco
nom
ics
172:
Lec
ture
22
23
•Fo
reig
n ai
d is
onl
y on
e pa
rt of
the
over
all r
elat
ions
hip
betw
een
rich
coun
tries
and
poo
r cou
ntrie
s
•A
cces
s to
oth
er c
ount
ries’
mar
kets
thro
ugh
trade
is
anot
her i
mpo
rtant
asp
ect o
f the
rela
tions
hip
•Th
ere
has
been
asy
mm
etry
in tr
ade
liber
aliz
atio
n:
ther
e ha
ve b
een
maj
or e
fforts
to li
bera
lize
glob
al tr
ade
in p
rodu
cts
rich
coun
tries
are
goo
d at
(e.g
., m
anuf
actu
res)
and
less
at l
iber
aliz
ing
prod
ucts
poo
r co
untri
es a
re g
ood
at (e
.g.,
agric
ultu
re, t
extil
es).
Ther
e ar
e hu
ge ri
ch c
ount
ry s
ubsi
dies
to th
eir f
arm
ers
Trad
e, a
id, a
nd d
evel
opm
ent
Eco
nom
ics
172:
Lec
ture
22
24
•Fo
r exa
mpl
e, a
gric
ultu
ral p
rodu
cers
in th
e w
ealth
y O
EC
D c
ount
ries
need
to b
e he
avily
sub
sidi
zed
to
surv
ive:
ann
ual s
ubsi
dies
abo
ut U
S$3
30 B
illio
n –
six
times
wha
t ric
h co
untri
es g
ive
poor
cou
ntrie
s in
de
velo
pmen
t aid
eac
h ye
ar (S
ourc
e: W
orld
Ban
k G
loba
l Eco
nom
ic P
rosp
ects
200
4)
Trad
e, a
id, a
nd d
evel
opm
ent
Eco
nom
ics
172:
Lec
ture
22
25
•D
oes
the
curr
ent w
orld
trad
e sy
stem
pro
mot
e or
hin
der
econ
omic
dev
elop
men
t in
Afri
ca?
•O
ppon
ents
of t
he c
urre
nt w
orld
trad
e re
gim
e ha
ve
poin
ted
to th
e ca
se o
f cot
ton
as a
n ex
ampl
e w
here
tra
de ru
les
have
hin
dere
d A
frica
n de
velo
pmen
t
Cot
ton
as a
lens
into
inte
rnat
iona
l tra
de
Eco
nom
ics
172:
Lec
ture
22
26
•D
oes
the
curr
ent w
orld
trad
e sy
stem
pro
mot
e or
hin
der
econ
omic
dev
elop
men
t in
Afri
ca?
•O
ppon
ents
of t
he c
urre
nt w
orld
trad
e re
gim
e ha
ve
poin
ted
to th
e ca
se o
f cot
ton
as a
n ex
ampl
e w
here
tra
de ru
les
have
hin
dere
d A
frica
n de
velo
pmen
t
•Te
ns o
f mill
ions
of A
frica
ns (i
n B
enin
, Bur
kina
Fas
o,
Tanz
ania
, etc
.) re
ly o
n co
tton
as a
cas
h cr
op, b
ut th
e w
orld
mar
ket i
s di
stor
ted
by U
S$4
bill
ion
annu
al
subs
idie
s by
the
U.S
. gov
ernm
ent t
o 25
,000
farm
ers
–Th
is fl
oodi
ng o
f the
mar
ket b
y U
.S. f
arm
ers
lead
s th
e w
orld
mar
ket p
rice
to d
rop,
per
haps
by
10-2
0%
(dep
endi
ng o
n th
e m
odel
)
Cot
ton
as a
lens
into
inte
rnat
iona
l tra
de
Eco
nom
ics
172:
Lec
ture
22
27
•M
inot
and
Dan
iels
(200
2) u
se h
ouse
hold
dat
a to
si
mul
ate
wha
t wou
ld h
appe
n to
farm
ers
in B
enin
if th
e co
tton
pric
e ro
se 1
0-20
%.
•Th
ey e
stim
ate
that
nat
iona
l pov
erty
rate
wou
ld fa
ll 7%
Mic
ro-e
vide
nce
on c
otto
n pr
ices
and
pov
erty
Eco
nom
ics
172:
Lec
ture
22
28
•M
inot
and
Dan
iels
(200
2) u
se h
ouse
hold
dat
a to
si
mul
ate
wha
t wou
ld h
appe
n to
farm
ers
in B
enin
if th
e co
tton
pric
e ro
se 1
0-20
%.
•Th
ey e
stim
ate
that
nat
iona
l pov
erty
rate
wou
ld fa
ll 7%
•M
eatu
dist
rict i
n Ta
nzan
ia is
ano
ther
cot
ton
grow
ing
regi
on. F
arm
ers
–an
d th
e ow
ners
of t
he lo
cal c
otto
n gi
nner
y, th
e on
ly fa
ctor
y in
the
dist
rict –
are
hard
hit
whe
n co
tton
pric
es fa
ll, a
s th
ey d
id in
the
late
-199
0s--
We
disc
usse
d ea
rlier
how
the
lack
of s
avin
gs
inst
rum
ents
mak
es it
har
d fo
r hou
seho
lds
to in
sure
ag
ains
t the
se s
orts
of p
rice
shoc
ks in
Mea
tu--
60%
of h
ouse
hold
s in
the
dist
rict g
row
cot
ton
as th
eir
mai
n ca
sh c
rop
Mic
ro-e
vide
nce
on c
otto
n pr
ices
and
pov
erty
Eco
nom
ics
172:
Lec
ture
22
29
Eco
nom
ics
172:
Lec
ture
22
30
•Fo
r nex
t tim
e: fi
nish
read
ings
from
wee
ks 1
2-13
Eco
nom
ics
172:
Lec
ture
22
31
Whi
tebo
ard
#1
Eco
nom
ics
172:
Lec
ture
22
32
Whi
tebo
ard
#2
Eco
nom
ics
172:
Lec
ture
22
33
Whi
tebo
ard
#3
Eco
nom
ics
172:
Lec
ture
22
34
Whi
tebo
ard
#4
Eco
nom
ics
172:
Lec
ture
22
35
Whi
tebo
ard
#5
Eco
nom
ics
172:
Lec
ture
22
36
Map
of A
frica
Eco
nom
ics
172:
Lec
ture
22
37
Map
of A
frica
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