Is African Manufacturing Skill Constrained?

Abstract

In most of the sub-Saharan African economies neither the levels of total factor productivity (TFP) nor the growth rates of TFP in manufacturing have been high. All studies of cross-country performance find that the sub- Saharan African economies are the largest bloc of nations that have not converged on the US. Most of the inter-country explanations have focused on easily measured aggregate variables such as the ratio of investment to GDP, education levels, and, in some models, proxies for political stability (Barro and Lee, 1993; Easterly, 1993). These models have as their underlying theoretical framework a view that the national economy can be modelled with a set of multiplicative inputs – an increase in the right hand side variables such as the investment rate or education level will produce an increase in growth rates. However, as is increasingly recognised, by, among others, the authors of the many papers on convergence, the particular specification of the implied production function is open to question, and the right-hand-side variables may themselves be endogenous. Moreover, in the case of the African nations, close observers question whether a simple increase in investment rates will generate the impact implied by the crosscountry regressions – many countries have experienced growing marginal capital–output ratios over the last two decades (Husain, 1993).