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Is Africa's recent growth sustainable?

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Abstract

In this paper we argue that the answer is yes. Our optimism rests on the finding that differences in the level of institutional quality predict cross-country variation in African economic growth during the period 1995-2011. This finding is quite robust. It holds in OLS, LAD and 2SLS settings; it holds for different measures of institutions and different measures of economic growth; and it holds for the period before and the period after the global financial crisis. We also show that changes in institutional quality predict cross-country variation in African economic growth. Moreover, if we split our sample in two equally sized groups, a high-growth and a lowgrowth group, then the high-growth group has experienced a statistically significant increase in institutional quality, whereas the low-growth group has not. Overall, this makes probable that institutions has played an important part in Africa’s recent growth acceleration. The continent has seen many false dawns, caused in large part by ups in commodity prices, but a growth acceleration driven by institutions is likely to signify a genuine African takeoff.

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  • Andersen, Thomas Barnebeck & Jensen, Peter Sandholt, 2013. "Is Africa's recent growth sustainable?," Discussion Papers of Business and Economics 8/2013, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2013_008
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    References listed on IDEAS

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    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, January.
    3. Laura N. Beny & Lisa D. Cook, 2009. "Metals or Management? Explaining Africa's Recent Economic Growth Performance," American Economic Review, American Economic Association, vol. 99(2), pages 268-274, May.
    4. Jeffrey D. Sachs, 2003. "Institutions Don't Rule: Direct Effects of Geography on Per Capita Income," NBER Working Papers 9490, National Bureau of Economic Research, Inc.
    5. Easterly, William, 2005. "National Policies and Economic Growth: A Reappraisal," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 15, pages 1015-1059 Elsevier.
    6. Andersen, Thomas Barnebeck & Dalgaard, Carl-Johan, 2013. "Power outages and economic growth in Africa," Energy Economics, Elsevier, vol. 38(C), pages 19-23.
    7. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    8. Jorge Saba Arbache & John Page, 2010. "How Fragile Is Africa's Recent Growth?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 19(1), pages 1-24, January.
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    Cited by:

    1. Andersen, Thomas Barnebeck & Barslund, Mikkel & Hansen, Casper Worm & Harr, Thomas & Jensen, Peter Sandholt, 2014. "How much did China's WTO accession increase economic growth in resource-rich countries?," China Economic Review, Elsevier, vol. 30(C), pages 16-26.

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    Keywords

    Institutions; economic growth; Africa;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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