Sectoral sources of sub-Saharan Africa’s convergence

Abstract

ABSTRACTFrom 1970 to 2010, sub-Saharan African’s (SSA) labour productivity hovered at around 6% of the US level. This lacklustre performance, which remained stubbornly low despite the SSA’s growth spurt that started in the mid-1990s, masks a great deal of variations across sectors and countries. Using a structural decomposition, we examine, for a representative sample of SSA countries, the sectoral sources that hold back their convergence to the US frontier. Our results suggest the presence of strong – and possibly long-lasting – headwinds that have wiped out the favourable effects of substantial, yet circumstantial, tailwinds. Headwinds, quantified by the unfavourable within- and reallocation-effects, are indicative of significant capital-deepening and technology gaps, both of which are extremely hard to bridge. The tailwinds, represented by favourable between-effects, result from the convergence of the SSA labour force to sectors where some US sectors have seen a slowdown of their productivity relative to that of the whole economy – a development unrelated to the fundamentals underlying the SSA economy. Although few exceptions emerged out of this general pattern, these results are indicative of a bleak outlook for the SSA economic performance at least in the medium run.