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Price Distortions and Economic Growth in Sub-Saharan Africa

  • Anderson, Kym
  • Brückner, Markus

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8530.

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Date of creation: Aug 2011
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Handle: RePEc:cpr:ceprdp:8530
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  1. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
  2. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  3. Anderson, Kym & Masters, William A., 2007. "Distortions to Agricultural Incentives in Africa," Agricultural Distortions Working Paper 48554, World Bank.
  4. O'Rourke, K, 1997. "Tariffs and Growth in the Late 19th Century," Papers 97/18, College Dublin, Department of Political Economy-.
  5. Sandri, Damiano & Valenzuela, Ernesto & Anderson, Kym, 2007. "Economic And Trade Indicators For Asia, 1960 To 2004," Agricultural Distortions Working Paper 48435, World Bank.
  6. Moritz Schularick & Solomos Solomou, 2011. "Tariffs and economic growth in the first era of globalization," Journal of Economic Growth, Springer, vol. 16(1), pages 33-70, March.
  7. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611, March.
  8. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  9. Anderson, Kym & Kurzweil, Marianne & Martin, Will & Sandri, Damiano & Valenzuela, Ernesto, 2008. "Measuring Distortions to Agricultural Incentives, Revisited," CEPR Discussion Papers 6924, C.E.P.R. Discussion Papers.
  10. Emily Oster, 2007. "Routes of Infection: Exports and HIV Incidence in Sub-Saharan Africa," NBER Working Papers 13610, National Bureau of Economic Research, Inc.
  11. repec:cup:cbooks:9780521127752 is not listed on IDEAS
  12. Barrios Cobos, Salvador & Bertinelli, Luisito & Strobl, Eric, 2008. "Trends in Rainfall and Economic Growth in Africa: A Neglected Cause of the Growth Tragedy," Proceedings of the German Development Economics Conference, Zurich 2008 41, Verein für Socialpolitik, Research Committee Development Economics.
  13. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 612-645, May.
  14. Michael A. Clemens & Jeffrey G. Williamson, 2002. "Why Did the Tariff-Growth Correlation Reverse After 1950?," NBER Working Papers 9181, National Bureau of Economic Research, Inc.
  15. Kym Anderson, 2009. "Distortions to Agricultural Incentives : A Global Perspective, 1955-2007," World Bank Publications, The World Bank, number 9436, March.
  16. Collier, Paul & Goderis, Benedikt, 2008. "Commodity Prices, Growth, and the Natural Resource Curse: Reconciling a Conundrum," MPRA Paper 17315, University Library of Munich, Germany.
  17. Sebastian Edwards, 1991. "Trade Orientation, Distortions and Growth in Developing Countries," NBER Working Papers 3716, National Bureau of Economic Research, Inc.
  18. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
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