Does Human Capital Matter in Manufacturing Value Added Development in Africa?

Abstract

Very few countries have been able to grow and accumulate wealth without investing in their manufacturing industries. Also, a strong and thriving manufacturing sector precipitates industrialization. Unfortunately, manufacturing value added (MVA) development in Africa has been very low. This paper empirically assesses the role of human capital in MVA (% of GDP) in Africa for the period, 1990-2011, using the IV-SLS technique with year and sub-regional fixed effects. Our results indicate that not all human capital indicators are ?born? equal with respect to MVA: Primary education has an inverted U-shaped relationship with MVA in Africa; secondary education has a negative significant relationship with MVA in the continent; and tertiary education has a significant positive association with MVA - tertiary education is good for increasing MVA in Africa. Other drivers have substantial relationship with African MVA. For example, economic development is significantly associated with MVA to the third degree polynomial, with negative leading coefficients. Other drivers with differential impacts include natural resources dependence, domestic investment, government consumption expenditure, trade openness, FDI stock, age dependency, credit to the private sector, social and political globalization, civil violence, and energy use intensity. We conclude with policy implications.