Research Topics

What Does It Say About the Opportunities for Growth and Structural Transformation of Sub-Saharan Africa?

In this paper we look at the economic development of Sub-Saharan Africa (SSA) in the context of structural transformation. We use Hidalgo et al.’s (2007) concept of product space to show the evolution of the region’s productive structure, and discuss the opportunities for growth and diversification. The majority of SSA countries are trapped in the export of unsophisticated, highly standard products that are poorly connected in the product space; this makes the process of structural transformation of the region particularly difficult. The products that are nearby to those they already export have the same characteristics. Therefore, shifting to these products will do little to improve SSA’s growth prospects. To jump-start and sustain growth, governments must implement policies and provide public inputs that will encourage the private sector to invest in new and more sophisticated activities.

It’s the Economic Structure . . . Duh!

Becoming a rich country requires the ability to produce and export commodities that embody certain characteristics. We classify 779 exported commodities according to two dimensions: (1) sophistication (measured by the income content of the products exported); and (2) connectivity to other products (a well-connected export basket is one that allows an easy jump to other potential exports). We identify 352 “good” products and 427 “bad” products. Based on this, we categorize 154 countries into four groups according to these two characteristics. There are 34 countries whose export basket contains a significant share of good products. We find 28 countries in a “middle product” trap. These are countries whose export baskets contain a significant share of products that are in the middle of the sophistication and connectivity spectra. We also find 17 countries that are in a “middle-low” product trap, and 75 countries that are in a difficult and precarious “low product” trap. These are countries whose export baskets contain a significant share of unsophisticated products that are poorly connected to other products. To escape this situation, these countries need to implement policies that would help them accumulate the capabilities needed to manufacture and export more sophisticated and better connected products.

We forecast average annual GDP growth for 147 countries for 2010–30. We use a cross-country regression model where the long-run fundamentals are determined by countries’ accumulated capabilities and the capacity to undergo structural transformation.