Is Africa an Economic Enigma? Clestin Monga United Nations - - PowerPoint PPT Presentation

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Is Africa an Economic Enigma? Clestin Monga United Nations Industrial Development Organization (UNIDO) Twitter: @CelestinMonga Helsinki, September 17, 2015 Outline 1. Objectives and Principles 2. Some Highlights (Analytics and Policies)

SLIDE 1

Is Africa an Economic Enigma?

Célestin Monga United Nations Industrial Development Organization (UNIDO)

Twitter: @CelestinMonga

Helsinki, September 17, 2015

SLIDE 2

Outline

1. Objectives and Principles
2. Some Highlights (Analytics and Policies)
3. What I Would Tell the Prime Minister

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1. Objectives and Principles

SLIDE 4

A puzzling confession from Bob Solow

SLIDE 5

The Approach

2 recurring themes:

 How economics has been

thought, taught, and applied in the African context

 What the study of Africa has

brought and continue to bring to economics

Diversity of opinions and approaches 137 contributors, 2 volumes, 93 chapters

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Oxford Handbook of Africa and Economics: An all-stars cast (*)

(*) Pictures selected (almost) randomly: economists are NOT expected to be good looking…

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2. Some Highlights

SLIDE 8

3 Interrelated Questions and Issues

Is the homo oeconomicus in Africa different?

 The “irrational African agent”  Does the rational man exist anywhere?

Should economic thinking be different about Africa?

 Importance of the endowment structure

Should economic policies be different in the African context?

 The rationale for differentiation  Dealing optimally with the legacy of compounded

distortions

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(a) Macro policies are generally good—even too restrictive This is an extremely unusual case, not the rule…

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5 10 15 20

2004 2005 2006 2007 2008 2009 2010 2011 2012

Oil-importing countries excluding South Africa Oil-exporting countries excluding Nigeria

Overall Fiscal Deficit/Surplus (Percent of GDP)

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Financial sector: Banks are doing quite well— and have done well during the crisis…

Return on Average Equity (Percent)

ROAE refers to commercial banks' net income to yearly averaged equity

(b) Sectoral policies are in the right direction—but require funding

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(c) Institutional policies are good are too ambitious--unrealistic Some distortions are here to stay for a while— Removing them abruptly would cause social and political crises…

11 Whose regime was “Corrupt”? Which one was “Clean”? Who wins the contest for the better Head of State? The Nyerere-Houphouet-Boigny Contest: Who Wins?

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(d) Structural change is taking place, but slowly

.2 .4.6 .8 1 6 7 8 9 10 Log GDP per capita (1990 International $ D&R sample Africa sample Agriculture .2 .4.6 .8 1 sEhi_ind 6 7 8 9 10 Log GDP per capita (1990 International $ D&R sample Africa sample Industry .2.4 .6.8 1 6 7 8 9 10 Log GDP per capita (1990 International $ D&R sample Africa sample Services (with fitted values)

Note that Africa data measure sectoral share of total employment whereas D&R data measure share of total hours. Hours shares from Duarte and Restuccia (2010) cover 29 countries from 1950-2006 Their data were accessed 07/24/2012 from Duarte's website GDP from Maddison (2010) Comparing sample from Duarte and Restuccia (2010) and African countries (sample from Jan 2013)

Employment shares of 3 broad sectors Source: McMillan and and Hartgen 2015

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2.0%
1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 1960-1975 1975-1990 1990-2000 2000-2010 average annual labour productivity growth

Sub-Saharan Africa

Within Between - static Between - dynamic

Source: McMillan and and Hartgen 2015

(d) Structural change is taking place, but slowly

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(e) There could be a big demographic dividend on the horizon

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

200 400 600 800 1000 1200 1400

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Dependency Ratio Population (millions)

Age 0-14 Age 65+ Age 15-64 Dependency ratio

Source: World Bank and UN projections

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(f) Trade is still the key Measuring GVC participation as FVA + DVX

B. Imported

intermediate inputs (value added): $20 million

Other Countries Country A Country A Other Countries Foreign Value Added in Own Exports Domestic Value Added in Other Countries’ Exports In this case DVX of country A is 40% (A/C) In this case, FVA of Country A is 20% (B/C)

A. Exports of

intermediate inputs (value added) absorbed by other countries to produce their exports: $ 40 million

B. Country A’s value added

contained in its final products, exported to and consumed in

ther countries: $ 60 million

Produces goods and services using both its

wn value added and

imported inputs (foreign value added)

A. Own value

added created locally: $80 million Export intermediate inputs to Country A for the production of its goods and services Intermediate inputs (value added) used in exports by other countries Country A’s valued added in the exports of final products for consumption in foreign markets

C. Total exports of Country A:

$100 million

C. Total exports of Country A:

$100 million

Source: Background paper for UNIDO Industrial Development Report 2016, by Foster-McGregor, Kaulichand and Stehrer

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16 16 16

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 1995 2000 2005 2010

Participation in Global Value Chains is up almost Everywhere…