What is Driving Africa’s Growth Miracle?

Posted: August 30th, 2014 | Author: Michael Goldstein | | No Comments »

In the USA, perception of Africa is largely unchanged from 5 or 10 years ago. Seen as a basket case. Ebola. Boko Haram. Etc.

There has been progress, though. But economists differ on what is going on. Economist Margaret McMillan (hat tip Neerav):

Some argue that growth across Africa is fundamentally a result of rising commodity prices and that if these prices were to collapse, so too would Africa’s growth rates (Lipton 2012). Others lament the so-called de-industrialisation of Africa. They worry that without a vibrant manufacturing sector, unemployment will remain high and the economies of Africa will not catch up to the more advanced countries of the world (Rodrik 2014). Finally, some warn that youth unemployment could lead to social unrest in sub-Saharan Africa (Filmer and Fox, 2014).

Taken together, one could conclude that Africa’s recent success will be short-lived.

But these observations fail to account for substantial shifts in the occupational structure of most African economies that provide a good reason for cautious optimism about the continent’s economic progress.

In particular, in my paper with Ken Harttgen – ‘What is Driving the ‘African Growth Miracle?’ – we show, for the first time, that roughly half of Africa’s recent growth can be traced to a significant decline in the share of the labour force engaged in agriculture. Previous researchers have shown that agriculture is by far the least productive sector in Africa (McMillan and Rodrik 2011, Gollin, Lagakos and Waugh 2014) and that income and consumption are lower in agriculture than in any other sector (McMillan and Verduzco-Gallo 2012, Gollin, Lagakos and Waugh 2014). Researchers have also noted that real consumption is growing in Africa (Young 2012) and that poverty is falling (Shimeles and Page 2014). To our knowledge, our paper is the first to connect these improvements in living standards to important occupational changes.

…

Having documented a meaningful decline in the share of the labour force engaged in agriculture over the past decade, we explore potential explanations for the decline. We find that:

*the agricultural employment share is falling faster in countries that started with a higher share of the labour force engaged in agriculture;

*in countries where the rise in commodity prices coincided with a relatively higher quality of governance, the female share of the labour force fell more rapidly;

*countries that have achieved at least one of the Comprehensive African Agriculture Development Program targets have experienced more rapid declines in the agricultural employment share;

*and increases in rural schooling (especially for females) are correlated with small declines in agricultural employment shares in the subsequent period.

Overall,

Fewer people doing agriculture and more people doing manufacturing and services is probably good

It hopefully means there is less demand for kids doing farm work

And that the returns to getting a good education will grow in Africa (like they have elsewhere)

Which in turn will lead to a greater demand for quality education

Which will accelerate a pivot from the UN goal of “all kids being in school” to “all kids actually getting a quality education”