Economics 172 Issues in African Economic Development. Professor Ted Miguel Department of Economics University of California, Berkeley

Transcription

1 Economics 172 Issues in African Economic Development Professor Ted Miguel Department of Economics University of California, Berkeley

2 Economics 172 Issues in African Economic Development Lecture 4 January 25, 2007

3 Economics 172: Lecture 4 3

4 An illustrative case: Africa versus Asia Both Africa and Asia start in 1950 at k 0 But A ASIA > A AFRICA y=a ASIA k α y=a AFRICA k α dk sa ASIA k α sa AFRICA k α 0 k 0 k* ASIA k* AFRICA k Economics 172: Lecture 4 4

5 Evidence on sources of growth If A were equal across regions / countries, and all differences were driven by baseline capital intensity, then we would see: systematically higher returns to investment in poor countries (like those in Sub-Saharan Africa), most capital flowing from rich to poor countries, and poor countries growing faster than rich countries. More evidence: African countries have shown massive increases in education (e.g., school enrollment, literacy) in the past 50 years but average growth has been zero Similarly, massive infusions of international capital often in foreign aid have not produced growth Economics 172: Lecture 4 5

6 Why are A and k lower in Africa? The next part of the course attempts to understand why A and k are relatively low in Africa The first potential explanation is the burden of Africa s tropical geography (Bloom and Sachs 1998) Economics 172: Lecture 4 6

7 The Curse of the Tropics? At the root of Africa s poverty lies its extraordinarily disadvantageous geography, which has helped to shape its societies and its interactions with the rest of the world. Bloom and Sachs (1998), p. 211 Economics 172: Lecture 4 7

8 The Curse of the Tropics? At the root of Africa s poverty lies its extraordinarily disadvantageous geography, which has helped to shape its societies and its interactions with the rest of the world. Bloom and Sachs (1998), p per capita income (PPP) - Worldwide Tropical $3,326, Non-tropical $9,027 Economics 172: Lecture 4 8

9 The Curse of the Tropics? At the root of Africa s poverty lies its extraordinarily disadvantageous geography, which has helped to shape its societies and its interactions with the rest of the world. Bloom and Sachs (1998), p per capita income (PPP) - Worldwide Tropical $3,326, Non-tropical $9,027 - Sub-Saharan Africa 93% of its land area lies in the tropics Tropical $1,732, Non-tropical $5,438 Economics 172: Lecture 4 9

10 1. Agricultural factors According to Bloom and Sachs(1998), a general pattern in the data is: for most crops, crop yields (per acre) are lower in Sub-Saharan Africa than other regions of the world. Why? Economics 172: Lecture 4 10

11 1. Agricultural factors Rainfall patterns Less rainfall than other regions More variable rainfall, drought more likely Economics 172: Lecture 4 11

12 Rainfall distribution, Sub-Saharan Africa Latin America Asia x Annual mm rainfall kdensity ASIA kdensity SSA kdensity LA Economics 172: Lecture 4 12

13 Rainfall distribution, Sub-Saharan Africa Latin America Asia x Annual mm rainfall kdensity ASIA kdensity SSA kdensity LA Economics 172: Lecture 4 13

14 1. Agricultural factors Rainfall patterns Less rainfall than other regions: arid soil More variable rainfall, drought more likely During : 24 of 42 Sub-Saharan African countries had at least two years of extreme drought Economics 172: Lecture 4 14

15 Trading off risk and return in agriculture Crop yield E[Yield, crop 2] E[Yield, crop 1] Time Economics 172: Lecture 4 15

16 Trading off risk and return in agriculture Crop yield Good rains E[Yield, crop 2] E[Yield, crop 1] Bad rains Time Economics 172: Lecture 4 16

17 Trading off risk and return in agriculture Crop yield Good rains E[Yield, crop 2] E[Yield, crop 1] Bad rains Time Economics 172: Lecture 4 17

18 1. Agricultural factors Rainfall patterns Less rainfall than other regions: arid soil More variable rainfall, drought more likely Soil quality is low (exception: highland regions) Economics 172: Lecture 4 18

19 Map of Africa Economics 172: Lecture 4 19

20 1. Agricultural factors Rainfall patterns Less rainfall than other regions: arid soil More variable rainfall, drought more likely Soil quality is low (exception: highland regions) Low rainfall and high temperatures! arid soil Economics 172: Lecture 4 20

21 1. Agricultural factors Rainfall patterns Less rainfall than other regions: arid soil More variable rainfall, drought more likely Soil quality is low (exception: highland regions) Low rainfall and high temperatures! arid soil Crop pests, livestock diseases Economics 172: Lecture 4 21

22 2. Health factors Economics 172: Lecture 4 22

23 2. Health factors Life expectancy and other health outcomes are worse in Sub-Saharan Africa than other regions. Why? Economics 172: Lecture 4 23

24 2. Health factors Widespread tropical disease Yellow fever (vector: mosquito), sleeping sickness / trypanosomiasis (vector: tse-tse fly), schistosomiasis / bilharzia (vector: snail), intestinal helminths Economics 172: Lecture 4 24

25 2. Health factors Widespread tropical disease Yellow fever (vector: mosquito), sleeping sickness / trypanosomiasis (vector: tse-tse fly), schistosomiasis / bilharzia (vector: snail), intestinal helminths The most important disease: malaria (vector: mosquito) Kills 1-2 millions Africans every year Economics 172: Lecture 4 25

26 2. Health factors Widespread tropical disease Yellow fever (vector: mosquito), sleeping sickness / trypanosomiasis (vector: tse-tse fly), schistosomiasis / bilharzia (vector: snail), intestinal helminths The most important disease: malaria (vector: mosquito) Kills 1-2 millions Africans every year The Global Fund: over US$4 billion committed to projects in 128 countries. One quarter to fight malaria (over 60% of total targeted to African countries) Economics 172: Lecture 4 26

27 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem Economics 172: Lecture 4 27

28 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? Economics 172: Lecture 4 28

29 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? 1. A causes B : A! B Economics 172: Lecture 4 29

30 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? 1. A causes B : A! B 2. B causes A : B! A Economics 172: Lecture 4 30

31 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? 1. A causes B : A! B 2. B causes A : B! A 3. A! B and B! A simultaneously Economics 172: Lecture 4 31

32 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? 1. A causes B : A! B 2. B causes A : B! A 3. A! B and B! A simultaneously 4. Some other factor C causes both: C! A and C! B Economics 172: Lecture 4 32

33 Health and wealth: cause or effect? How can we determine whether poor health is the cause of poverty (as Bloom and Sachs assert) or vice versa? This is a difficult problem More generally how to interpret Corr (A, B) > 0? 1. A causes B : A! B 2. B causes A : B! A 3. A! B and B! A simultaneously 4. Some other factor C causes both: C! A and C! B 5. The association is purely coincidental (regression confidence intervals help address this) Economics 172: Lecture 4 33

34 3. Transport factors Transport costs are critical determinants of trade and technology transfer, especially historically Economics 172: Lecture 4 34

35 3. Transport factors Ratio of coastline to land area is very low in Africa: 1.15 in SSA, 2.54 in South Asia, 15.7 Western Europe Major rivers to the interior (e.g., the Nile, Niger, Congo, and Zambezi rivers) have large cataracts and are only navigable locally Economics 172: Lecture 4 35

36 3. Transport factors Ratio of coastline to land area is very low in Africa: 1.15 in SSA, 2.54 in South Asia, 15.7 Western Europe Major rivers to the interior (e.g., the Nile, Niger, Congo, and Zambezi rivers) have large cataracts and are only navigable locally 28% of SSA population lives in land-locked countries Large distance from the major industrialized economies in Europe, Asia, North America (contrast: Mexico) Economics 172: Lecture 4 36

37 Economics 172: Lecture 4 37

38 For next time: Read Bloom and Sachs (1998), and Miguel (2005) Economics 172: Lecture 4 38

39 Whiteboard #1 Economics 172: Lecture 4 39

40 Whiteboard #2 Economics 172: Lecture 4 40

41 Whiteboard #3 Economics 172: Lecture 4 41

42 Whiteboard #4 Economics 172: Lecture 4 42

43 Whiteboard #5 Economics 172: Lecture 4 43

44 Map of Africa Economics 172: Lecture 4 44

45 Map of Africa Economics 172: Lecture 4 45