Academic journal article The Journal of Developing Areas

The Spatial Effects on the Rate of Economic Growth: Evidence from Sub-Saharan Africa

Academic journal article The Journal of Developing Areas

The Spatial Effects on the Rate of Economic Growth: Evidence from Sub-Saharan Africa

Article excerpt

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

Since 1960's African countries have experienced a checkered development past and have trailed other regions of the world in terms of economic growth and development, even in the presence of natural resources abundance (Arrighi 2002; and Ayittey 2005). This trend has led to most Africa countries experiencing retarded growth and a vicious cycle of poverty with the average citizens of several African countries living on less than a dollar a day (Sachs et. al., 2004). The ending of this poverty trap for African economies has been the goal of the 2015 UN Millennium Project.

There are myriad of reasons cited for this trend of underdevelopment, slow and sometimes even negative growth, and high levels of acute poverty in Africa. In the early 1960's when many African countries gained independence, they adopted inward looking policies, thus reducing their participation in worldwide trade and investments. These inward looking policies (import substitution policies) have been cited as one of the main explanations for the low growth rates experienced by African countries in comparison to other regions of the world. The inward looking policies which ignored the principles of comparative advantage and created an inefficient industrial sector with little export potential, thus, leading to overall economic inefficiencies and slow growth prospects (Roemer, 1994). As shown by Easterly and Levine (1997) and other studies including Mauro (1995), and Barro (1997), socially fragmented societies which almost all African countries are, often more prone to poor policy management, conflicts, and other socio/political issues which retard economic growth than homogeneous societies. Others have cited macroeconomic issues such as inflation (Hodge, 2005), exchange rate volatility (Ndambendia and AL-Hayky, 2011), infrastructure development (Ndambendia and AL-Hayky, 2011), and human capital quality and availability, geography (Bloom and Sachs, 1998), and foreign capital including Aid, Foreign Direct Investment, and remittances inflows (Nsiah, and Fayissa, 2011). Many recent studies argue that, a country with good macroeconomic policies, natural resources abundance, and investments in human and fiscal capital, will fail to achieve high level sustainable economic growth in the absence of good governance institutions (Fosu, 2008b; Gyimah-Brempong and de Camacho, 2006; and Alence, 2004).

Studies that have investigated the determinants of economic growth in Africa have done so with the innate assumption that each African economy exists on its own. Consequently, previous studies only consider within country factors of growth without considering the possible impact of the economic performance of proximate countries. According to the new economic geography theory, all things are related, but nearer things are more related. It is, thus, important in all economic analysis to check and correct for the impact of space. This is to say that regardless of estimation methodology employed in investigating the determinants of growth of African countries, it is important to take into account the issue of space, else one may end up with biases in the magnitudes and direction of estimates (Greene, 2003). To our knowledge, no previous study on growth rates of African countries has exclusively taken into consideration the impact of proximate countries. The contributions of this study to existing literature are twofold. First, we introduce a spatial analysis to African economic growth literature. Second, we also account for space simultaneously in the error term.

The key objective of this study is to explore how the proximity (space) of countries that experience high growth rates either promote, or impede the rate of economic growth in proximate Sub-Sahara African countries based on the new economic geography literature which suggests that the proximate economic agents' (countries) do influence one another. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.