The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck?

Abstract

The striking reversal reported by the Sub-Saharan African (SSA) economy from the early 1990s through 2015 has been well documented by now. What is less known is whether this resurgence has translated into a gradual process of convergence to the U.S. level. With the benefit of major upgrades in the source data, we employ well-tested and familiar methods in the development literature to sort out the quantitative importance of the fundamentals behind the process of convergence. While the SSA growth revival has generated local pride, foreign envy and enthusiasm from international policy makers, our results suggest a more sober tone. In 2010, per capita income and labour productivity levels relative to the U.S. are well below those reported during the pre-1990 period. Regardless of the way in which human capital is measured, relative factor input endowments constitute the primary force that held back the SSA relative labour productivity-a major departure from conventional wisdom. While the story from the sectoral level remains broadly consistent with the one obtained from the aggregate level, additional insights emerge. These include disproportionately lower relative levels of sectoral labour productivity that led to a considerably slow and atypical process of structural transformation. Although relative intersectoral labour productivity gaps have been reduced, sources of allocative inefficiency remain large. We argue that all indications point to a combination of favourable shocks behind the SSA wakening pulse rather than a set of economic fundamentals that feature a genuine economic development. The burst of the commodity prices in the mid-2014 that coincided with a sharp weakening of the performance of this economy constitutes a compelling counterfactual.