Structural Convergence between African Countries: Empirical Evidence

Ali Bako Ousmane,Mehmet Şişman

doi:10.52459/jowett13130122

Abstract

This paper aims to investigate structural convergence in selected African countries over the period 1994-2019. Using panel data for 48 African countries and several estimation methods [Panel-Corrected Standard Errors (PCSE), Feasible Generalized Least Squares (FGLS), tobit model, instrumental variable, and Granger non-causality], the results show the existence of the phenomenon of sectoral structural convergence in Africa, i.e. a greater similarity in sectoral structures while income gaps are narrowing. The paper also highlights the service sector's low relative productivity level and industrial sector's low labor force attractiveness despite a significant shift in labor from the agricultural sector and a higher level of relative productivity respectively. To address this issue, the development and acquisition of human and physical capital would be necessary to develop the industrial sector and increase the service sector's productivity.

Highlights

The convergence theory, which states that lagging countries grow faster than leading countries, has been in the economic literature since Veblen (1915), Ramsey (1928), Viner (1950), Solow (1956), Gerschenkron (1962), Abramovitz (1979, 1986)
The results show that convergence of sectoral structures is well established for the European Union (EU), the old members (EU-15), and for the new Central and Eastern Europe Countries (CEEC) members
Based on the employment data, the industrial sector increases slightly, whereas considering the value-added data, it increases more significantly and even exceeds the service sector for values of lnGDP Per-capita close to 9. For this same value for the employment data, the service sector is far above the industrial sector. This shows that the industrial sector in Africa has a better level of relative productivity than the service sector

Summary

Introduction

The convergence theory, which states that lagging countries grow faster than leading countries, has been in the economic literature since Veblen (1915), Ramsey (1928), Viner (1950), Solow (1956), Gerschenkron (1962), Abramovitz (1979, 1986). Authors such as Krugman (1991) and Wacziarg (2001) focused on structural convergence, another interesting aspect of convergence. According to Wacziarg (2001) "two countries are said to structurally converge if convergence in their per capita incomes is accompanied by convergence in their sectoral structure" This definition refers to sectoral structural convergence, limited to sectoral structure similarity. Absolute structural convergence refers to a process that extends beyond sectoral similarity and includes business cycle synchronization and foreign trade integration (Alexoaei and Robu 2018).

Objectives

Methods

Results

Conclusion