Economic growth and poverty traps in sub-Saharan Africa: The role of education and TFP shocks

SFX Get it!(opens in a new window)|Entitled full text(opens in a new window)|View at Publisher| Export | Download | More... Research in Economics Volume 67, Issue 3, September 2013, Pages 226-242 Economic growth and poverty traps in sub-Saharan Africa: The role of education and TFP shocks (Article) Cazzavillan, G.a , Donadelli, M.b , Persha, L.c a Department of Economics, Ca' Foscari University of Venice, Venice, Italy b Department of Economics and Finance, LUISS Guido Carli, Viale Romania 32, 00197 Rome, Italy c Department of Geography, University of North Carolina at Chapel Hill, NC, United States View references (37) Abstract This paper investigates the ". education-total factor productivity trade-off" in explaining income per worker differences between sub-Saharan (unlucky) and G7 (lucky) economies. First, we examine the dynamics of average years of schooling (i.e. education), capital per worker, income per worker, and total factor productivity (TFP) across sub-Saharan and G7 countries. We confirm that physical capital and education levels partially explain income per worker differences between lucky and unlucky economies. Second, we undertake a novel examination of the impact of technology shocks on income per worker, with the goal of understanding the role of technology variation in causing cross-country income per worker differences, and as a potential contributor to overall slow growth in the sub-Saharan region. In a vector autoregressive (VAR) framework, we show that the impact of ". ad hoc" TFP shocks on income per worker is larger in unlucky economies than in lucky ones. We observe that average TFP volatility in the "unlucky world" is eight times higher than in the "G7 world". We argue that the order of magnitude of the impact heavily depends on the level of the TFP volatility. Last, we suggest that the documented differences in the amount of physical capital and in the productivity of human capital between these two regions add conceptual support for the existence of poverty traps for sub-Saharan Africa.