Explaining Sub-Sahara Africa's recent economic growth acceleration
Economic growth and poverty reduction in sub Sahara Africa have dominated theoretical and empirical debate for a long time. In the empirical literature, researchers have stressed different views to explain the recent growth episode in the region.
The current study uses a panel of 45 countries with four year averages over the period 1996 to 2008 to identify the key determinants of the recent growth acceleration in sub-Sahara Africa. Among the major conclusions emerging from the study is that foreign direct investment, foreign aid, private investment, and human capital growth had the largest positive and robustly significant impacts on per capita GDP growth during this period. Improved governance and terms of trade also had a positive and moderately significant impact on the recent growth, but do not explain much of the growth acceleration.
Higher ethnic fractionalization, inflation, HIV/AIDS, and unsustainable foreign debt had negative and moderately significant impact on growth. It appears that ethnic fractionalization reduces human capital investment and to a lesser extent the efficiency of institutions. The disaggregation of investment in to private and public investments clearly indicates that private investment has a greater impact on growth than public investment.
The overall policy implication is that sub-Saharan African governments must establish and maintain economic policies that raise the ratio of private and public investment to GDP, promote human capital development, increase foreign direct investment, increase trade openness, increase foreign aid, reduce inflation, and improve governance. The study also discussed a policy framework to promote sustainable growth and reduce poverty in sub-Sahara Africa.
Sub Saharan Africa Studies
0511: Economic theory
0639: Sub Saharan Africa Studies