Traditional Services and Economic Development in Sub-Saharan Africa

This paper seeks to examine the impact of agricultural productivity and the share of traditional service sector employment on GDP per capita. The hypothesis is that in countries where agricultural productivity is high, there are two positive effects of agricultural productivity on GDP per capita: a direct effect resulting from increased agricultural productivity and an indirect effect operating through the share of employment in traditional services. The latter generally has a negative impact on GDP per capita, but this is mitigated through high agricultural productivity. That is, in countries with high agricultural productivity, employment in traditional services enhances GDP per capita, while in countries with low agricultural productivity, employment in traditional services tends to lower GDP per capita. Thus, increases in agricultural productivity enhance GDP per capita by indirectly making traditional sector employment more productive.