## _wp04176

## Source details

**Canonical URL:** [_wp04176](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04176.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04176.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04176.pdf.json)

---

### I. INTRODUCTION
- Poverty reduction is a central objective of the IMF’s policy design and advice for low-income countries (LICs), alongside correcting financial imbalances and promoting development of productive resources and economic growth.
- The paper examines prospects for lowering poverty in sub-Saharan Africa by analyzing sources of growth in individual countries using a growth accounting framework.
- Empirical literature cited emphasizes that economic growth plays a critical role in lowering poverty (Dollar and Kraay (2001); and Ghura, Leite, and Tsangarides (2002)).
- Growth accounting methodological caveats:
  - The measured residual commonly attributed to TFP growth may reflect political disturbances and conflicts, institutional changes, droughts, external shocks, changes in government policies, and measurement errors.
  - Growth accounting may misattribute growth from exploitation of natural resources (e.g., new oil fields) to TFP rather than factor accumulation.
  - Results reflect proximate sources of growth, not fundamental causes.
- Key summary results:
  - Average real GDP growth in the region during 1960-2002 was driven primarily by factor accumulation with little or no role for TFP.
  - Recent increase in growth (1997-2002 relative to 1990-96) accompanied by a pickup in TFP growth, notably in countries with IMF-supported programs adjudged “on track,” CFA franc zone countries, and middle-income countries.
  - Average annual growth at 3½ percent during 1997-2002 is less than half the estimated growth needed to achieve the MDG of halving the fraction of population living below $1 per day by 2015.
  - Doubling the average annual growth rate requires a significant boost in TFP growth, raising the investment-GDP ratio, and resolution of conflicts.

### II. GROWTH PERFORMANCE IN SUB-SAHARAN AFRICA: STYLIZED FACTS
- Time coverage and data sources:
  - Time coverage: 1960-2002; subgroup definitions and tables referenced for country and subgroup growth and sectoral contributions.
- Aggregate and subgroup findings (selected exact figures):
  - The region-wide average growth rate during 1960-2002 was 3.3 percent.
  - This growth rate barely exceeds the average population growth rate of about 3 percent.
  - Only four countries (Botswana, Equatorial Guinea, The Gambia, and Mauritius) registered an average growth rate of at least 5 percent during 1960-2002.
  - In 1997-2002, the number of countries with average growth of at least 5 percent rose to 12.
  - Middle-income countries (MICs) experienced the fastest real GDP growth with an annual average of 4.8 percent.
  - Conflict countries had the weakest growth performance with an annual average of 2.4 percent, especially during 1991-96.
  - Most country subgroups, except those with programs adjudged “off track,” experienced growth boosts in 1997-2002 versus 1991-96.
  - Countries with IMF programs adjudged “on track” improved real GDP growth from 1.5 percent (1991-96) to 4.1 percent (1997-2002).
- Sectoral composition and contribution:
  - The tertiary sector had the largest share in total value added; tertiary sector contributed about 50 percent to real GDP growth for sub-Saharan Africa as a group.
  - For oil-producing countries, the secondary sector’s contribution (which includes the oil sector) was the largest.
  - Over time: tertiary sector share remained broadly stable; primary sector share declined; secondary sector share rose (driven by oil-producing and middle-income countries).
  - Real GDP growth correlation coefficients: secondary sector contribution correlation of 0.9; tertiary sector contribution correlation of 0.8; primary sector correlation weak.
- Trade, saving, and investment (selected exact figures):
  - Average share of trade (exports plus imports) in GDP was relatively high in sub-Saharan Africa during 1960-2002 compared with LICs in the world—driven largely by middle-income and, over time, oil-producing countries.
  - Average investment-GDP ratio in sub-Saharan Africa during 1960-2002 was about 21 percent, lower than LICs in the world at about 25 percent.
  - Annual average domestic saving-GDP ratio in sub-Saharan Africa was about 11½ percent during 1960-2000, weaker than LICs at about 17 percent.
  - Domestic saving deteriorated significantly over time for virtually all country groups in sub-Saharan Africa; in contrast, domestic saving-GDP ratio increased over time for LICs in the world.

### III. GROWTH ACCOUNTING: METHODOLOGY AND FINDINGS
- Production function and key assumptions:
  - Cobb-Douglas production function: Yt = At Kt^α Lt^(1−α).
  - Growth decomposition: Ẏ/Y = Ȧ/A + α (K̇/K) + (1−α) (L̇/L).
  - Data spliced from IMF WEO and World Bank WDI; output is GDP at constant prices (local currency units).
  - Labor proxied by economically active population (no human capital adjustment; educational attainment included in TFP).
  - Capital stock via perpetual inventory method with initial capital-output ratio in 1960 set at 1.5 and depreciation rate at 6 percent.
  - Capital share α set at 0.4 (robust to α = 0.3).
- Principal quantitative growth-accounting results (α = 0.4; selected exact figures):
  - Average TFP growth for sub-Saharan Africa as a whole was nil during 1960-2002.
  - Real GDP growth driven largely by factor accumulation.
  - Almost half of the countries experienced declines in TFP on average during 1960-2002.
  - Only five countries (Botswana, Equatorial Guinea, Mauritius, Swaziland, and Uganda) experienced average TFP growth of more than 1 percent during 1960-2002.
  - During 1981-2000, contributions of both physical capital and TFP declined significantly; conflict countries experienced average TFP decline of 0.8 percent during 1981-2000, and a decline of 2.1 percent on average during 1991-2000.
  - Decadal pattern: in the 1960s, TFP growth contributed on average about 30 percent of output growth; its contribution became negative in subsequent decades.
- Recent subperiod decomposition (selected exact figures):
  - Sub-Saharan Africa: Real GDP growth 3.3 (full period), 2.1 (1991-96), 3.6 (1997-2002).
  - Overall growth decomposition (1960-2002): Real GDP growth 3.2; Physical capital 1.8; Labor 1.5; TFP 0.0.
  - 1990-1996: Real GDP growth 2.1; Physical capital 1.3; Labor 1.6; TFP -0.8.
  - 1997-2002: Real GDP growth 3.6; Physical capital 1.3; Labor 1.4; TFP 0.8.
  - Low-income countries: 1990-1996 real GDP growth 1.7 vs 1997-2002 real GDP growth 2.9; TFP -1.0 vs 0.2.
  - Program-on-track countries: 1990-1996 Real GDP growth 1.5; 1997-2002 Real GDP growth 4.1 with TFP contribution moving from -1.2 to 1.0.
- Interpretation of recent TFP pickup:
  - Improved TFP in 1997-2002 linked to:
    - better performance in countries with IMF programs adjudged “on track” (efficiency gains from macroeconomic and structural reforms),
    - CFA franc countries (likely positive impact of the 1994 devaluation combined with structural reforms),
    - increased oil production in Equatorial Guinea.

### IV. GROWTH PROSPECTS AND CHALLENGES
- Core message:
  - Despite the recent pickup, sub-Saharan Africa must substantially raise real GDP growth rates on a sustained basis to reduce pervasive poverty and catch up with LICs in other regions.
  - Both productivity improvements (TFP) and higher investment are required.
- Empirical drivers of TFP growth identified:
  - Good quality institutions that deliver better law and order, better bureaucratic quality, less corruption, lower risks of expropriation, and lower probability of government repudiation of contracts.
  - Human capital development: increase quantity and quality of basic health care, education, and other high-priority services.
  - Favorable macroeconomic policy environment: lower levels of external debt and government consumption, and higher levels of international reserves.
  - Diversification of the economic base from agriculture toward manufacturing and services.
  - Trade liberalization to promote competitiveness and global integration.
- Structural reform priorities to support diversification and TFP:
  - Accelerate restructuring and privatization of public enterprises to reduce budgetary subsidies and transfers and expand private sector scope.
  - Deepen financial sector reform:
    - Ensure independence and full accountability of central banks.
    - Deepen and broaden financial markets.
    - Establish or strengthen prudential regulation and supervision of banks.
    - Open banking sectors to healthy competition and international best practices.
    - Strengthen legal framework for banking activities.
  - Trade liberalization and complementary reforms to enhance competitiveness.
- Investment imperative:
  - Boosting TFP alone is insufficient; it is essential to raise investment to levels comparable to other developing countries.
  - Over 1991-2000, the average investment-GDP ratio and the real GDP growth rate was at 18½ percent and [text truncated in source].
- Conflict, institutions, and external support:
  - Conflicts and cycles of violence severely hinder growth; resolution of conflicts is a prerequisite for growth enhancement in a number of countries.
  - Empirical literature links risks of conflict to economic factors (initial income, commodity export dependence, prior growth) and noneconomic factors (ethnic fractionalization).
  - Recommended roles:
    - International donor community: raise financial support to boost government investment and concerted efforts to resolve conflicts.
    - Governments: focus on effective delivery of essential public services and basic infrastructure, and promotion of human resource and social development.

### V. POLICY IMPLICATIONS AND PRIORITIES
- Immediate policy priorities:
  - Boost investment-GDP ratios to levels closer to other low-income economies to support poverty reduction objectives.
  - Achieve significant improvement in TFP growth through:
    - institutional reforms (law and order, bureaucratic quality, anti-corruption, contract enforcement),
    - human capital investment (health, education),
    - macroeconomic stability,
    - trade liberalization,
    - structural diversification toward manufacturing and services.
- Complementary actions:
  - Strengthen financial systems and regulatory frameworks to mobilize and allocate savings efficiently.
  - Pursue privatization and enterprise restructuring to improve efficiency and crowd-in private investment.
  - International and regional cooperation to resolve conflicts and stop cycles of violence is critical for countries affected by conflict to resume sustainable growth.

*Source: _wp04176 - excerpt (IMF external publication).*

### References..............................................................................................................

### _wp04176 - References..............................................................................................................

### I. INTRODUCTION
- Poverty reduction is a central objective of the IMF’s policy design and advice for low-income countries (LICs), alongside correcting financial imbalances and promoting development of productive resources and economic growth.
- The paper investigates prospects of lowering poverty in sub-Saharan Africa by examining sources of growth in individual countries and drawing lessons for growth prospects using a growth accounting framework.
- Empirical literature cited indicates economic growth plays a critical role in lowering poverty (see Dollar and Kraay (2001); and Ghura, Leite, and Tsangarides (2002)).
- The growth accounting debate for East Asia has focused on whether growth was driven by factor accumulation (capital and labor) or total factor productivity (TFP) (see Bosworth and Collins (2003); Collins and Bosworth (1996); Krugman (1994); Sarrel (1997); and Young (1995)).
- For sub-Saharan Africa, prior analyses largely point to factor accumulation as the main source of growth, with TFP playing a minor role; Appendix I provides a brief literature survey.
- Methodological caveats:
  - The measured residual from growth accounting (commonly attributed to TFP growth) may reflect political disturbances and conflicts, institutional changes, droughts, external shocks, changes in government policies, and measurement errors.
  - Growth accounting does not decompose properly growth stemming from exploitation of natural resources (e.g., new oil fields may appear as TFP rather than factor accumulation).
  - Results reflect proximate sources of growth, not fundamental causes.
- Key summary results highlighted:
  - Average real GDP growth in the region during 1960-2002 was driven primarily by factor accumulation with little or no role for TFP.
  - Recent increase in growth (1997-2002 relative to 1990-96) accompanied by a pickup in TFP growth, notably in countries with IMF-supported programs adjudged “on track,” CFA franc zone countries, and middle-income countries.
  - Average annual growth at 3½ percent during 1997-2002 is less than half the estimated growth needed to achieve the MDG of halving the fraction of population living below $1 per day by 2015.
  - Doubling the average annual growth rate requires a significant boost in TFP growth, raising the investment-GDP ratio, and resolution of conflicts.
- Paper organization: Section II stylized facts; Section III growth accounting; Section IV growth prospects and challenges; Section VI conclusions.

### II. GROWTH PERFORMANCE IN SUB-SAHARAN AFRICA: SOME STYLIZED FACTS
- Time coverage: 1960-2002; subgroup definitions in Table 1; country and subgroup growth in Tables 2 and 3; sectoral contributions in Tables 4 and 5.
- Aggregate and subgroup findings:
  - The region-wide average growth rate during 1960-2002 was 3.3 percent.
  - This growth rate barely exceeds the average population growth rate of about 3 percent and is less than half of what is needed to achieve the MDG of halving the fraction of population living below $1 per day.
  - Only four countries (Botswana, Equatorial Guinea, The Gambia, and Mauritius) registered an average growth rate of at least 5 percent during 1960-2002.
  - In 1997-2002, the number of countries with average growth of at least 5 percent rose to 12.
  - Middle-income countries (MICs) experienced the fastest real GDP growth with an annual average of 4.8 percent.
  - Countries mired in conflicts had the weakest growth performance with an annual average of 2.4 percent, especially during 1991-96.
  - Most country subgroups, except those with programs adjudged “off track,” experienced growth boosts in 1997-2002 versus 1991-96.
  - Countries with IMF programs adjudged “on track” improved real GDP growth from 1.5 percent (1991-96) to 4.1 percent (1997-2002).
- Sectoral composition and contribution:
  - The tertiary sector (including public and private services) had the largest share in total value added, following patterns seen in low-income countries globally.
  - The secondary sector’s share was lowest across subgroups except for middle-income and oil-producing countries.
  - Over time, tertiary sector share remained broadly stable, primary sector share declined, and secondary sector share rose—driven by oil-producing and middle-income countries.
  - The tertiary sector contributed about 50 percent to real GDP growth for sub-Saharan Africa as a group; this was also true for the group of all LICs in the world.
  - For oil-producing countries, the secondary sector’s contribution (which includes the oil sector) was the largest.
  - Growth performance deteriorated almost continuously from the 1960s to the mid-1990s, with a significant decline in agriculture’s contribution in the 1970s and decline in tertiary sector contribution in the 1980s and 1990s.
  - Real GDP growth correlation coefficients: secondary sector contribution correlation of 0.9; tertiary sector contribution correlation of 0.8; primary sector correlation weak.
- Trade, saving, and investment:
  - Average share of trade (exports plus imports) in GDP was relatively high in sub-Saharan Africa during 1960-2002 compared with LICs in the world—driven largely by middle-income and, over time, oil-producing countries.
  - Average investment-GDP ratio in sub-Saharan Africa during 1960-2002 was about 21 percent, lower than LICs in the world at about 25 percent.
  - Annual average domestic saving-GDP ratio in sub-Saharan Africa was about 11½ percent during 1960-2000, weaker than LICs at about 17 percent.
  - Domestic saving deteriorated significantly over time for virtually all country groups in sub-Saharan Africa; in contrast, domestic saving-GDP ratio increased over time for LICs in the world.

### III. GROWTH ACCOUNTING
- Production function and methodology:
  - Standard Cobb-Douglas production function: Yt = At Kt^α Lt^(1−α).
  - Growth decomposition: Ẏ/Y = Ȧ/A + α (K̇/K) + (1−α) (L̇/L).
  - Data spliced from IMF World Economic Outlook (WEO) and World Bank World Development Indicators databases; time coverage 1960-2002.
  - Output: GDP at constant prices (local currency units).
  - Labor: proxied by economically active population (not adjusted for human capital; educational attainment included in TFP).
  - Capital stock constructed via perpetual inventory method with initial capital-output ratio in 1960 set at 1.5 and depreciation rate at 6 percent.
  - Capital share α set at 0.4 (robust to α = 0.3).
- Key growth-accounting findings (Tables 6-9):
  - Average TFP growth for sub-Saharan Africa as a whole was nil during 1960-2002.
  - Real GDP growth driven largely by factor accumulation.
  - Almost half of the countries experienced declines in TFP on average during 1960-2002.
  - Only five countries (Botswana, Equatorial Guinea, Mauritius, Swaziland, and Uganda) experienced average TFP growth of more than 1 percent during 1960-2002.
  - During 1981-2000, contributions of both physical capital and TFP declined significantly, reflecting poor performance of conflict countries:
    - Conflict countries experienced average TFP decline of 0.8 percent during 1981-2000, and a decline of 2.1 percent on average during 1991-2000.
  - In the 1960s, TFP growth contributed on average about 30 percent of output growth, but its contribution became negative in subsequent decades.
  - Subgroups with positive TFP growth on average during 1991-2000: middle-income, oil-producing, nonconflict, and CFA franc countries.
  - Evaluation of 1990-2002:
    - Average growth rose from 2.1 percent during 1990-96 to 3.6 percent during 1997-2002, driven by significant increase in TFP growth.
    - This increase largely propelled by improved performance in countries with IMF programs adjudged “on track,” CFA franc countries, and increased oil production in Equatorial Guinea.
    - Improved performance of CFA franc countries during 1997-2002 likely reflects positive impact of the 1994 devaluation on tradables and complementary structural reforms (internal adjustment measures, privatization, bank restructuring, liberalization of domestic prices and interest rates at regional level).
    - Increased TFP during 1997-2002 in “on track” program countries likely reflected efficiency gains from macroeconomic and structural reforms.
- Comparative perspective:
  - Bosworth and Collins (2003) compare regional growth performance for 1960-2000; their results indicate sub-Saharan Africa’s growth was the slowest of all regions, driven largely by poor TFP growth.

### IV. GROWTH PROSPECTS AND CHALLENGES
- Despite recent pickup, sub-Saharan Africa must substantially raise real GDP growth rates on a sustained basis to reduce pervasive poverty and catch up with LICs in other regions.
- Both productivity improvements (TFP) and higher investment are required.
- Empirical literature indicates factors positively influencing TFP growth include:
  - Good quality institutions:
    - Institutions that deliver better law and order, better bureaucratic quality, less corruption, lower risks of expropriation, and lower probability of government repudiation of contracts (Bosworth and Collins, 2003).
  - Human capital development:
    - Increase quantity and quality of basic health care, education, and other high-priority services to improve social indicators over the longer term.
  - Favorable macroeconomic policy environment:
    - Elements include lower levels of external debt and government consumption, and higher levels of international reserves (Senhadji, 2000).
  - Diversification of the economic base:
    - Countries that diversified from agriculture to secondary and tertiary sectors experienced higher TFP growth (Berthélemy and Söderling, 2001).
    - Empirical correlations in this paper: real GDP growth correlated 0.9 with secondary sector contribution and 0.8 with tertiary sector contribution; weak correlation with primary sector.
- Structural reform priorities to support diversification and TFP:
  - Accelerate restructuring and privatization of public enterprises to reduce budgetary subsidies and transfers, expand private sector scope, and promote efficiency and growth (Calamitsis, Basu, and Ghura (1999)).
  - Deepen financial sector reform:
    - Ensure independence and full accountability of central banks.
    - Deepen and broaden financial markets.
    - Establish or strengthen prudential regulation and supervision of banks.
    - Open banking sectors to healthy competition and international best practices.
    - Strengthen legal framework for banking activities.
  - Trade liberalization to promote competitiveness of domestic producers and accelerate integration into the global economy.
- Investment imperative:
  - Boosting TFP alone is insufficient; essential to raise investment to levels comparable to other developing countries.
  - Over the period 1991-2000, the average investment-GDP ratio and the real GDP growth rate was at 18½ percent and [text truncated in source].

*Source: _wp04176 - References..............................................................................................................*

### 1.8 percent, respectively, in the LICs in sub-Saharan Africa, compared with about 24 percent

### _wp04176 - 1.8 percent, respectively, in the LICs in sub-Saharan Africa, compared with about 24 percent

### Main findings on growth drivers and recent performance
- Average real GDP growth in sub-Saharan Africa during 1960-2002 was driven primarily by factor accumulation with little or no role for TFP; reported aggregate: Sub-Saharan Africa real GDP growth 3.3 (full period) and specific tabulations showing 3.3, 2.1, 3.6 for subperiods 1960-2002, 1991-96, 1997-2002 respectively.
- The recent pickup in growth (1997-2002, relative to 1990-96) was associated with an improvement in TFP growth in:
  - countries whose IMF-supported programs were adjudged to be on track,
  - countries in the CFA franc zone,
  - countries in the middle-income category.
- The growth rates required to significantly lower poverty by 2015 are high relative to past performance and would need a significant boost in TFP growth.
- Investment-GDP ratios in sub-Saharan Africa remain low compared to the group of low-income economies in the world and would need to be boosted.
- Conflicts and cycles of violence severely hinder growth; resolution of conflicts is a prerequisite for growth enhancement in a number of countries.

### Quantitative patterns and subgroup statistics (selected exact figures)
- Subgroup growth (Table 3, selected rows):
  - Sub-Saharan Africa: 3.3 (full period), 2.1 (1991-96), 3.6 (1997-2002).
  - Low-income countries: 2.9 (full period), 1.3 (1991-96), 2.9 (1997-2002).
  - Middle-income countries: 4.8 (full period), 4.7 (1991-96), 6.1 (1997-2002).
  - Oil-producing countries: 4.1 (full period), 2.5 (1991-96), 7.6 (1997-2002).
  - Conflict countries: 2.4 (full period), -0.8 (1991-96), 1.5 (1997-2002).
  - Nonconflict countries: 3.6 (full period), 3.0 (1991-96), 4.3 (1997-2002).
  - CFA franc countries: 3.5 (full period), 2.7 (1991-96), 4.9 (1997-2002).
  - Non-CFA-franc countries: 3.2 (full period), 1.7 (1991-96), 2.9 (1997-2002).
- Sectoral contributions and shares (Table 4, aggregated):
  - Sub-Saharan Africa: Real GDP growth 3.1; Primary sector contribution 0.7; Secondary 0.9; Tertiary 1.5; Exports share 31.8; Imports share 23.6; Investment 44.6; Gross domestic savings 29.5; Investment-GDP ratio and savings figures appear across tables and subgroup rows.
- Sources of growth decomposition (Table 7 and Table 8, alpha = 0.4):
  - Overall (1960-2002): Sub-Saharan Africa Real GDP growth 3.2; Physical capital 1.8; Labor 1.5; TFP 0.0.
  - By recent subperiods (Table 9):
    - 1990-1996: Real GDP growth 2.1; Physical capital 1.3; Labor 1.6; TFP -0.8.
    - 1997-2002: Real GDP growth 3.6; Physical capital 1.3; Labor 1.4; TFP 0.8.
  - For low-income countries (1990-1996 vs 1997-2002): 1.7 vs 2.9 (real GDP growth), TFP -1.0 vs 0.2.
  - Program-on-track countries: 1990-1996 Real GDP growth 1.5; 1997-2002 Real GDP growth 4.1 with TFP contribution moving from -1.2 to 1.0.

### Drivers identified for raising private investment and TFP
- Factors empirically associated with boosting private investment:
  - increases in government investment,
  - a stable macroeconomic environment,
  - financial deepening,
  - improvements in the quality of institutions.
- Factors argued to positively influence TFP growth in sub-Saharan Africa:
  - good quality institutions,
  - human capital development,
  - a favorable macroeconomic policy environment,
  - trade liberalization,
  - diversification of the economic base from agriculture to manufacturing and services.
- Evidence cited: correlation between growth and contributions of the secondary and tertiary sectors is higher than that of agriculture; TFP growth found to be vulnerable to terms of trade shocks, supporting the need for economic diversification.

### Conflict, institutions, and external support
- Empirical literature summarized:
  - Risks for increased conflicts are explained primarily by economic factors (initial income, dependence on commodity exports, prior economic growth) and noneconomic factors (ethnic fractionalization).
  - Spillovers from regional conflicts harm economic performance; conflicts in neighboring countries heighten the risk of civil war.
  - Yartey (2004) finds conflicts in sub-Saharan Africa are caused by low economic growth and weak institutions.
- Recommended roles:
  - International donor community: raise financial support to boost government investment and concerted efforts to resolve conflicts.
  - Governments: focus on effective delivery of essential public services and basic infrastructure, and promotion of human resource and social development.
  - Institutional improvements specified: better law and order, better bureaucratic quality, less corruption, lower risks of expropriation, and lower probability of government repudiation of contracts.

### Policy implications and priorities
- Boost investment-GDP ratios to levels closer to other low-income economies to support poverty reduction objectives.
- Achieve significant improvement in TFP growth through:
  - institutional reforms,
  - human capital investment,
  - macroeconomic stability,
  - trade liberalization,
  - structural diversification away from agriculture toward manufacturing and services.
- International and regional cooperation to resolve conflicts and stop cycles of violence is critical for countries affected by conflict to resume sustainable growth.

*Source: _wp04176 - excerpt (IMF external publication). *

### References

### _wp04176 - References

### Major themes from cited literature
- Growth accounting and decomposition: Many studies employ growth accounting frameworks to attribute output growth to factor accumulation (capital and labor) versus total factor productivity (TFP) changes (Bosworth, Collins, and Chen 1995; Senhadji 2000; Matovu and Yuguda 1999; Beddies 1999; Amin 2002).
- Role of factor accumulation versus TFP:
  - Several country studies find factor accumulation dominates growth (Amin 2002 for Cameroon; Dike 1995 for Nigeria; Vera-Martin 2000 for Mali, Niger, and Senegal; Onjala 2002 for Kenya’s agricultural sector).
  - Other studies find significant or rising TFP contributions associated with policy and institutional change (Arora and Bhundia 2003 for South Africa; Matovu and Yuguda 1999 for Botswana; Erasmus and Ricci 2003 for Swaziland during 1994-2001 where TFP accounted for half of overall output growth).
- Institutions, policy, and openness:
  - Institutions and governance are emphasized as crucial for growth and TFP (Subramanian and Roy 2001 on Mauritius; Rodrik, Subramanian, and Trebbi 2002 on the primacy of institutions).
  - Trade openness and liberalization are linked to productivity gains in some contexts (Jonsson and Subramanian 2001 for South Africa; Rodrik 1998 on trade policy effects; Sachs and Warner 1997 on lack of openness).
- Conflict, instability, and health shocks:
  - Civil war and political instability adversely affect growth (Collier 1999; Collier and Hoeffler 2002; Gyimah-Brempong and Traynor 1999; Nkurunziza and Bates 2003).
  - HIV/AIDS has macroeconomic consequences (Haacker 2002a; Haacker 2002b).
- Policy determinants of growth in Sub-Saharan Africa:
  - Positive influences on per capita growth include higher private investment to GDP, human capital development, lower budget deficits relative to GDP, maintained external competitiveness, and export volume growth (Calamitsis, Basu, and Ghura 1999; Ghura and Hadjimichael 1996).
  - International shocks (terms of trade declines, world interest rates, aid flows, external debt) exert adverse effects (Fosu 2001).

### Key study findings (select)
- Bosworth, Collins, and Chen (1995): Decomposition for 88 countries (1960–92) shows small TFP increases in developing countries; accumulation of physical and human capital accounts for most growth per worker. Africa: output per worker rose by an average of only 0.5 percent over the past three decades; TFP growth has been negative.
- Senhadji (2000): Growth accounting for 88 countries (1960–94) finds Africa’s lower growth stems from lower physical and human capital accumulation and lower TFP growth.
- Ghura and Hadjimichael (1996): For Sub-Saharan Africa (1981–92), (1) private investment increases have a large positive impact on per capita growth; (2) favorable public policies (lower budget deficit relative to GDP, lower inflation, external competitiveness, structural reforms, human capital development, slower population growth) stimulate growth; (3) conditional convergence in per capita income.
- Rodrik (1998): Trade policy in Sub-Saharan Africa matters similarly as elsewhere; fundamentals for long-term growth are human resources, physical infrastructure, macroeconomic stability, and the rule of law.
- Sachs and Warner (1997): For Sub-Saharan Africa (1965–1990), slow growth is explained by poor economic policies—particularly lack of openness—and geographical factors (lack of access to the sea, tropical climate).
- Arora and Bhundia (2003): South Africa (1980–2001) — the significant increase in real GDP growth after 1994 was mainly due to TFP growth rather than greater factor accumulation; turnaround in TFP partly reflects policy and institutional changes.
- Beddies (1999): The Gambia (1964–98) — aggregate production function exhibits increasing returns to scale; private and public investment and human capital accumulation significantly boost output.
- Dike (1995): Nigeria (1950–1991) — growth driven by labor expansion and capital accumulation; collapse in capital investment from the early 1980s and lack of efficiency gains drove long-run decline in GDP growth rates.
- Matovu and Yuguda (1999): Botswana (1982–1997) — impressive growth due to both sizable factor accumulation and TFP growth; TFP growth comparable to rapidly growing Asian countries though not as important as factor inputs.
- Onjala (2002): Kenya (1960–1995) — output growth dominated by factor accumulation in agriculture and in the aggregate; productivity improved with trade policy reforms.
- Erasmus and Ricci (2003): Swaziland (1980–2001) — pre-1994 rapid growth driven mainly by capital accumulation; 1994–2001 muted growth due to declines in contributions from both factor accumulation and TFP; during 1994–2001, TFP growth accounted for half of overall output growth.

### Appendix I: Selected literature survey — country and regional summaries
- Botswana — Matovu and Yuguda (1999)
  - Growth accounting for 1982-1997 shows growth enabled by both sizable factor accumulation and TFP growth; TFP significant and comparable to rapidly growing Asian countries.
- Cameroon — Amin (2002)
  - Growth accounting and econometric analysis for 1961-1997 indicate factor inputs more important than TFP growth.
- Congo, Dem. Rep — Akitoby and Cinyabuguma (2004)
  - Cointegration methodology confirms poor economic policies and weak governance (through effects on TFP and capital accumulation) adversely affected DRC growth during 1960-2000.
- The Gambia — Beddies (1999)
  - 1964-1998 data show increasing returns to scale; private and public investment and human capital accumulation boost output significantly.
- Kenya — Onjala (2002)
  - 1960-1995: manufacturing and agricultural sector analysis shows output growth dominated by factor accumulation; aggregate growth dominated by factor inputs; productivity improved with trade policy reforms.
- Mauritius — Subramanian and Roy (2001)
  - Evaluates explanations for growth since the mid-1970s; institutions-based explanation offers great promise in explaining growth performance.
- Nigeria — Dike (1995)
  - 1950-1991: labor force expansion and capital accumulation were the engine of growth; collapse in capital investment from early 1980s and lack of efficiency gains major sources of long-run decline.
- Mali, Niger, Senegal — Vera-Martin (2000)
  - Cointegration estimates and potential output calculations indicate capital and labor account for bulk of growth; labor contributes over long run, capital particularly important short-run (Mali and Niger).
- South Africa — Arora and Bhundia (2003)
  - 1980-2001: post-1994 real GDP growth increase mainly due to TFP growth; turnaround in TFP reflects policy and institutional changes.
- South Africa — Jonsson and Subramanian (2001)
  - Trade liberalization had a positive impact on TFP growth during the 1990s; positive long-run relationship between TFP and openness.
- Swaziland — Erasmus and Ricci (2003)
  - 1980-2001: pre-1994 growth due to factor accumulation, especially capital; 1994-2001 decline in both factor accumulation and TFP contributions; 1994-2001 TFP accounted for half of output growth.
- Africa (22 countries) — Nkurunziza and Bates (2003)
  - Political instability adversely affected economic growth over 1960-1990.
- Sub-Saharan Africa — Calamitsis, Basu, and Ghura (1999)
  - 1981-1997: per capita real GDP growth positively influenced by higher private investment/GDP, human capital development, lower budget deficit/GDP, external competitiveness, and export volume growth; these variables aided the region’s post-reform recovery of 1995-97.
- Africa — Fosu (2001)
  - International dimension important: exports (especially manufacturing) beneficial; international shocks (terms of trade decline, world interest rates, aid flows, external debt) adversely affect growth.
- Sub-Saharan Africa (44 countries) — Gyimah-Brempong and Traynor (1999)
  - Statistically significant inverse relationship between political instability and economic growth.
- West Africa — Sacerdoti, Brunschwig, and Tang (1998)
  - Growth accounting shows impact of human capital on growth; identifies terms of trade, trade openness, government deficit, and share of government investment as key policy variables.
- Sub-Saharan Africa — Rodrik (1998)
  - Trade policy has worked similarly as elsewhere; fundamentals are human resources, physical infrastructure, macroeconomic stability, and rule of law.
- Sub-Saharan Africa — Sachs and Warner (1997)
  - 1965-1990: slow growth attributed to poor policies (lack of openness) and geographical factors (lack of access to sea, tropical climate).
- Sub-Saharan Africa — Ghura and Hadjimichael (1996)
  - 1981-92: private investment raises per capita growth; beneficial policies include lower budget deficit/GDP, lower inflation, external competitiveness, structural reforms, human capital development, slower population growth; conditional convergence present.
- World (21 sub-Saharan African countries included) — Senhadji (2000)
  - 1960-94 growth accounting for 88 countries shows lower African growth due to lower physical and human capital accumulation and lower TFP growth relative to other regions.
- World (21 sub-Saharan African countries included) — Bosworth, Collins, and Chen (1995)
  - 1960-92 decomposition: increases in TFP small in developing countries; physical and human capital accumulation account for most growth per worker; Africa stands out with only 0.5 percent average increase in output per worker and negative TFP growth over past three decades.

*Source: _wp04176 - References*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04176.pdf_