Is Investment In Africa Too Low Or Too High Macro And Micro Evidence

Many analysts decry the level of investment in Africa, saying it is too low. But there is no evidence, in cross-country data or in microeconomic data from Tanzania, that private and public capital is productive in Africa. In that sense, investment in Africa may be viewed as too high.

Many analysts decry the l ...

January 2001 Many analysts decry the level of investment in Africa, saying it is too low. But there is no evidence, in cross-country data or in microeconomic data from Tanzania, that private and public capital is productive in Africa. In that sense, investment in Africa may be viewed as too high. Devarajan, Easterly, and Pack investigate the relationship between weak growth performance and low investment rates in Africa. The cross-country evidence suggests no direct relationship. The positive and significant coefficient on private investment appears to be driven by Botswana's presence in the sample. Allowing for the endogeneity of private investment, controlling for policy, and positing a nonlinear relationship make no difference to the conclusion. Higher investment in Africa would not by itself produce faster GDP growth. Africa's low investment and growth rates seem to be symptoms of underlying factors. To investigate those factors and to correct for some of the problems with cross-country analysis, Devarajan, Easterly, and Pack undertook a case study of manufacturing investment in Tanzania. They tried to identify why output per worker declined while capital per worker increased. Some of the usual suspects--such as shifts from high- to low-productivity sub-sectors, the presence of state-owned enterprises, or poor policies--did not play a significant role in this decline. Instead, low capacity utilization (possibly the byproduct of poor policies) and constraints on absorptive capacity for skill acquisition seem to be critical factors. If Tanzania is not atypical, the low productivity of investment in Africa was the result of a combination of factors that occurred simultaneously, not any single factor. What does this tell us? First, we should be more careful about calling for an investment boom so that Africa can resume growth. Unless some or all of the underlying problems are addressed, the results may be disappointing. We should also be more circumspect about Africa's low savings rate; it may be low because returns to investment were so low. The relatively high level of capital flight from Africa may have been a rational response to the lack of investment opportunities at home. Second, there is probably no single key to unlocking investment and GDP growth in Africa. All of the factors contributing to low productivity should be addressed simultaneously. This paper--a joint product of Public Economics and Macroeconomics and Growth, Development Research Group--is part of a larger effort in the group to study growth and development in Africa. The authors may be contacted at [email protected], [email protected], or [email protected].

'The big, era-defining questions and, at last, the subtle, tenable answers, teased out without clich? or compromise. A vital volume at a critical moment.' Dr Augustus Casely-Hayford, Director, Africa '05 'This book dispels the myth of a uniformly hopeless, hungry continent. It shows just how'extraordinarily diverse Africa is'and how much it'has changed in the last 20 years.'Full of fresh thinking on'problems that face Africa and new African approaches to development.' Richard Dowden, Director, Royal African Society This ground-breaking book, with a foreword by former President of Ireland (1990?1997) and UN Human Rights Commissioner (1997?2002) Mary Robinson, uniquely distils the complex issues surrounding Africa at the beginning of the 21st century. African and Western scholars provide a fascinating 'map' for the reader to navigate between issues such as urban and rural livelihoods, the potential of fresh water fishing, health, the HIV/AIDS crisis, conflict and efforts at peacemaking. Also included are critical assessments of Africa's role in the global economy, the growth of regional economic cooperation within Africa, the influence of ethnicity on the continent's politics, the evolution of its political institutions, and the impact of Africa's legal systems on its development. A substantial introductory essay by the editors measures the distance Africa has travelled and the lessons it has learned since Africa in Crisis, the classic Earthscan book, was published in 1985. Ben Wisner is visiting research fellow at DESTIN, London School of Economics and at Benfield Hazard Research Centre, University College London, and visiting professor of environmental studies, Oberlin College, USA. Camilla Toulmin is Director of the International Institute for Environment and Development. Rutendo Chitiga is a freelance writer and editor, and has a postgraduate degree in environment and development.

This volume reflects the highlights of their deliberations.

Using empirical data from over 50 countries, this book shows how even small differences in a number of factors combine to boost or block productivity, and proposes two new measures as alternatives to simple comparisons of industrial productivity.

The essays are concise, yet comprehensive, and each essay contains a substantial set of references, which an interested researcher or student could follow up. . . In addition to representing multidisciplinary interactions, this collection encompasses several different perspectives within development economics, so the reader can learn, for example, both about neoclassical approaches and dependency theories in the same volume. This makes the collection unique and all the more valuable. . . This is a very good reference collection, as the individual essays are informative and provide a good overall perspective on the topic that they set out to address. The extensive bibliography at the end of each essay adds further value to this collection. Ashwini Deshpande, Economic and Political Weekly These new volumes impress along two dimensions. First, they highlight important connections between economic development and variables such as culture, warfare, and ethnicity, which are sometimes ignored by mainstream economists. Second, they analyze the economic development experience of different regions such as Africa, Latin America, and East Asia. . . a valuable reference for scholars and practitioners in the field. Highly recommended. H.A. Faruq, Choice This two-volume original reference work provides a comprehensive overview of development economics and comprises contributions by some of the leading scholars working in the field. Authors are drawn from around the world and write on a wide range of topics. After providing an introduction to the subject (by examining issues like the meaning and measurement of development, historical and interdisciplinary approaches, empirical regularities and data problems), the contributors provide a wealth of perspectives on, and analyses of, development economics. They discuss alternative approaches to development, the macroeconomics of growth, factors and sources of economic development (such as capital, labor, entrepreneurship, resources and technology), major sectors of concern (such as agriculture, industry, services and the informal sector) and international issues (such as trade, capital and labor flows and technology transfers). Income distribution and poverty, the state and other institutions, and actual development experiences are explored. The contributors provide analytical contributions, as well as the relation between these contributions and real world and policy issues from a variety of alternative perspectives. Scholars, students, policymakers and other development practitioners will all find this comprehensive reference invaluable.

This is the second of a two-volume work taking stock of the study of Africa in the twenty-first century: its status, research agenda and approaches, and place. It is divided into two parts, the first entitled Globalisation Studies and African Studies, and the second, African Studies in Regional Contexts. Topics addressed in part one include: trans-boundary formations and the study of Africa; global economic liberalisation and development in Africa; African diasporas, academics and the struggle for a global epistemic presence; and the problem of translation in African studies. Part two considers: African and area studies in France, the US, the UK, Australia, Germany and Sweden; anti-colonialism and Russian/soviet African studies; African studies in the Caribbean in historical perspective; the teaching of African history and the history of Africa in Brazil; African studies in India; African studies and historiography in China in the twenty-first century; and African studies and contemporary scholarship in Japan.