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Price Distortions and Economic Growth in Sub-Saharan Africa

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  • Anderson, Kym
  • Brückner, Markus

Abstract

To what extent has Sub-Saharan Africa’s slow economic growth over the past five decades been due to price and trade policies that have discouraged production of agricultural relative to non-agricultural tradables? This paper uses a new set of estimates of policy distortions to relative prices to address this question econometrically. We first test if these policy distortions respond to economic growth, using rainfall and international commodity price shocks as instrumental variables. We find that on impact there is no significant response of relative price distortions to changes in real GDP per capita. We then test the reverse proposition and find a statistically significant and sizable negative effect of relative price distortions on the growth rate of Sub-Saharan African countries. Our fixed effects estimates suggest that, during 1960-2005, a one standard deviation increase in distortions to relative prices reduced the region’s real GDP per capita growth rate by about half a percentage point per annum.

Suggested Citation

  • Anderson, Kym & Brückner, Markus, 2011. "Price Distortions and Economic Growth in Sub-Saharan Africa," CEPR Discussion Papers 8530, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8530
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    References listed on IDEAS

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    More about this item

    Keywords

    Agricultural incentives; Economic growth; Trade restrictions;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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