## Explaining Income Divergence in the Western Indian Ocean: Evidence from Mauritius, Seychelles, Madagascar, and Comoros

_IMF Working Papers, August 7, 2026_

## Source details

**Canonical URL:** [Explaining Income Divergence in the Western Indian Ocean: Evidence from Mauritius, Seychelles, Madagascar, and Comoros](https://www.imf.org/en/publications/wp/issues/2026/08/06/explaining-income-divergence-in-the-western-indian-ocean-evidence-from-mauritius-578494)

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## Bibliographic details
- Authors: Andrew Esparon, Aissatou Diallo, Mahamoud Islam
- Published: August 7, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229054362.001

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### Core finding
- Mauritius and Seychelles achieved significantly higher levels of real GDP per capita since 1980, while Madagascar and Comoros exhibited more limited progress.
- The analysis points to the importance of institutions, human capital, and external integration in explaining cross-country differences in income levels across the four island economies.

### Methods and empirical approach
- Combines qualitative analysis with panel econometric methods: FMOLS and DOLS.
- Uses real GDP per capita as the primary outcome variable to assess divergent development paths since 1980.

### Key empirical determinants identified
- Institutional quality: associated with higher levels of real GDP per capita.
- Human capital development: associated with higher levels of real GDP per capita.
- Trade openness: associated with higher levels of real GDP per capita.
- Macroeconomic policies: associated with higher levels of real GDP per capita.
- Interpretation: stronger governance frameworks and investment in human capital align with higher income levels in Mauritius and Seychelles; persistent institutional and structural challenges align with lower income levels in Madagascar and Comoros.

### Policy implications and recommendations
- Strengthen governance frameworks to improve institutional quality.
- Invest in human capital development to raise real GDP per capita.
- Promote external integration through trade openness to support economic performance.
- Maintain sound macroeconomic policies to facilitate higher income levels.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2026/08/06/explaining-income-divergence-in-the-western-indian-ocean-evidence-from-mauritius-578494_