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Sector growth and the dual economy model - evidence from Cote d'Ivoire, Ghana, and Zimbabwe

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  • Blunch, Niels-Hugo
  • Verner, Dorte

Abstract

The authors analyze and compare sectoral growth in three African economies - Cote d'Ivoire, Ghana and Zimbabwe - since 1965. They extend the classic dual economy - the agriculture and industry sectors - by adding the services sector. For all the three countries, they find at least one statistically significant long-run relationship for sectoral GDP. This indicates a large degree of interdependence in long-run growth among the three sectors. This also provides evidence against the basic dual economy model, which implies that a long-run relationship cannot exist between agricultural and industrial output. Analysis of the impulse response and analysis of short-run sectoral growth support the results on the interdependence of sectoral growth. Both imply that a positive link exists between growth in industry and growth in agriculture. Their findings contradict the literature on the dual economy - and suggest that more attention should be paid to inter-sectoral dynamics and dependencies in Sub-Saharan Africa. Why? Because an adverse shock in, say, agriculture after a drought is likely to have an adverse impact on the other economic sectors. Policymakers should try to accommodate not only the initial shock in agriculture but also its adverse effects in other sector. They find that focusing mainly on industry was not optimal policy in Cote d'Ivoire, Ghana, and Zimbabwe. For maximum economy-wide growth, it would have been better to balance policies to include all three sectors: agriculture, industry, and services.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2175.

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Date of creation: 30 Sep 1999
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Handle: RePEc:wbk:wbrwps:2175

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Keywords: Public Health Promotion; Agricultural Knowledge&Information Systems; Water and Industry; Health Monitoring&Evaluation; Economic Theory&Research; Health Monitoring&Evaluation; Governance Indicators; Water and Industry; Economic Theory&Research; Achieving Shared Growth;

References

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  1. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
  2. Montiel, Peter J, 1996. "Financial Policies and Economic Growth: Theory, Evidence and Country-Specific Experience from Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 65-98, October.
  3. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  4. repec:fth:stanho:e-92-3 is not listed on IDEAS
  5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  6. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  7. Skott, Peter & Larudee, Mehrene, 1998. "Uneven Development and the Liberalisation of Trade and Capital Flows: The Case of Mexico," Cambridge Journal of Economics, Oxford University Press, vol. 22(3), pages 277-95, May.
  8. Munisamy Gopinath & Terry L. Roe & Mathew D. Shane, 1996. "Competitiveness of U.S. Food Processing: Benefits from Primary Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1044-1055.
  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. Canning, David J, 1988. "Increasing Returns in Industry and the Role of Agriculture in Growth," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 463-76, September.
  11. Martin, Will & Mitra, Devashish, 1999. "Productivity growth and convergence in agriculture and manufacturing," Policy Research Working Paper Series 2171, The World Bank.
  12. Storm, Servaas, 1997. "Domestic constraints on export-led growth: a case-study of India," Journal of Development Economics, Elsevier, vol. 52(1), pages 83-119, February.
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Cited by:
  1. repec:pra:mprapa:25503 is not listed on IDEAS
  2. Bigsten , Arne & Levin, Jörgen, 2000. "Growth, Income Distribution, and Poverty: A Review," Working Papers in Economics 32, University of Gothenburg, Department of Economics.
  3. Diao, Xinshen & Hazell, Peter & Thurlow, James, 2010. "The Role of Agriculture in African Development," World Development, Elsevier, vol. 38(10), pages 1375-1383, October.
  4. Eric Manes, 2009. "Pakistan's Investment Climate : Laying the Foundation for Growth, Volume 2. Annexes," World Bank Other Operational Studies 12411, The World Bank.
  5. Fiess, Norbert M. & Verner, Dorte, 2001. "Intersectoral dynamics and economic growth in Ecuador," Policy Research Working Paper Series 2514, The World Bank.
  6. Gloria O. Pasadilla & Christine Marie M. Liao, 2007. "Has Liberalization Strengthened the Link between Services and Manufacturing?," Microeconomics Working Papers 22047, East Asian Bureau of Economic Research.
  7. Verner, Dorte & Fiess, Norbert M., 2003. "Oil, agriculture, and the public sector: linking intersector dynamics in Ecuador," Policy Research Working Paper Series 3094, The World Bank.
  8. Roland CRAIGWELL & Darrin DOWNES & Kevin GREENIDGE & Keva STEADMAN, 2008. "Sectoral Output, Growth And Economic Linkages In The Barbados Economy Over The Past Five Decades," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(2), pages 123-136.

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