Jared Barnett David Alexander Nancy Du Varun Sharma.

Jared BarnettDavid AlexanderNancy DuVarun Sharma

1960s - 7 African countries predicted to have GDP growth over 7%• Negative growth from 1965-1990

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

I. Geographic and Demographic Concerns

II. Colonialism and Current Politics

III. Ethnic Divisions

IV. Poor Economic Policies

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 2004-06, 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 2nd stage of democratic growth

Better leadership in development programs Promote regional collaboration Neighbor Multiplier