Why has Africa Grown So Slowly Xavier SalaiMartin

Why has Africa Grown So Slowly? Xavier Sala-i-Martin Columbia University

Distortions and the Cost of Investment • Investment is low in Africa • Investment is Expensive • Risk may be overstated

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Human Capital (1): Education • School Enrollments are low • Investment in Education does not lead to more enrollment: incentives • Education of GIRLS has added benefits in terms of Health and Fertility

Survey of Business Leaders

Human Capital (II): Health • Life expectancy has increased in African over the last 40 years but: – AIDS – Malaria • We now face a public health crisis, a pandemic of biblical proportions

Survey of Business Leaders

Geography, Tropics and Institutions • Most Sub-Saharan Africa has adverse • • Geography: Landlocked Tropical – Direct impact on productivity (soil, specific agricultural productivity, …) (Sachs and Warner 1995) – Direct impact on health and, thus, productivity (Sachs and Warner 1995) – Indirect impact on institutions (Acemoglu et al. 2000) • INSTITUTIONS AND NATURAL RESOURCES (Nigeria, Sala-IMartin and Subramanian 2003)

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Survey of Business Leaders. Corruption and the Natural Resource Curse

Survey of Business Leaders

Survey of Business Leaders

Openness (Globalization? ) • Africa is essentially CLOSED (1% of world trade) • And whatever Trade depends too much on a single natural resource (oil, diamonds, …)

Is Globalization to Blame? • What is it? Free Movement of – Capital – Labor – Goods – Technology – Information • Have any of these arrived in Africa?

Excessive Public Spending and “bad government”

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Survey of Business Leaders • See all the slides on Institutional Environment

Ethnic Fractionalization and Conflict • Countries at war between 1960 -2002: Algeria, Angola, Burundi, Chad, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Guinea. Bissau, Liberia, Libya, Mauritania, Morocco, Mozambique, Namibia, Nigeria, Rwanda, Sierra Leone, Somalia, South Africa, Sudan, Togo, Uganda or Zimbabwe.

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USING BACE COEFFICIENTS

What to do? • African Countries – – – Peace Institutions/Markets Openness • Rich Countries: – Change AID Programs: • Focus on R&D – Open Markets (especially EU, USA and Japan ‘s agricultural protectionism) • NGOs: – Education (progresa-type programs) – Health (doctors without borders)