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External Debt, Labour Productivity Growth and Convergence: Evidence from Sub-Saharan Africa

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  • Evelyn Wamboye
  • Kiril Tochkov

Abstract

type="main" xml:id="twec12166-abs-0001"> Sub-Saharan Africa (SSA) has long suffered from lagging productivity and excessive levels of indebtedness. Using both parametric and non-parametric techniques, this paper examines the impact of external debt on labour productivity growth and convergence across SSA economies over the period 1970–2010. The results indicate the presence of debt-overhang effects, regardless of model and sample specification. Debt reduction through the Heavily Indebted Poor Countries and Multilateral Debt Relief initiatives enhanced growth but was not successful in offsetting the debt-overhang effects. Moreover, excessive levels of external debt were responsible for divergence in output per worker over the early 1990s. Although this trend was reversed over the 2000s, reduction in debt through the debt relief initiatives seems to have been insufficient in helping heavily indebted countries in SSA catch up with the labour productivity levels of the best-performing economies in the region.

Suggested Citation

  • Evelyn Wamboye & Kiril Tochkov, 2015. "External Debt, Labour Productivity Growth and Convergence: Evidence from Sub-Saharan Africa," The World Economy, Wiley Blackwell, vol. 38(5), pages 856-877, May.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:5:p:856-877
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-5
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    Cited by:

    1. Wang, Zhaohua & Bui, Quocviet & Zhang, Bin & Nawarathna, Chulan Lasantha K. & Mombeuil, Claudel, 2021. "The nexus between renewable energy consumption and human development in BRICS countries: The moderating role of public debt," Renewable Energy, Elsevier, vol. 165(P1), pages 381-390.
    2. Mohammed Ershad HUSSAIN & Mahfuzul HAQUE & Richard S. IGWIKE, 2015. "Relationship between Economic Growth and Debt: An Empirical Analysis for Sub-Saharan Africa," Journal of Economics and Political Economy, KSP Journals, vol. 2(2), pages 262-275, June.
    3. Taner Turan & Halit Yanikkaya, 2019. "External Debt, Growth and Investment for Developing Countries: The Role of Government Effectiveness," Working Papers 2019-03, Gebze Technical University, Department of Economics.
    4. Taner Turan & Halit Yanıkkaya, 2021. "External debt, growth and investment for developing countries: some evidence for the debt overhang hypothesis," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(3), pages 319-341, September.
    5. Souleymane Ndao & Nikolay Nenovsky & Kiril Tochkov, 2019. "Does monetary integration lead to income convergence in Africa? a study of the CFA monetary area," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 18(2), pages 67-85, June.

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