Export Quality and Growth in Sub-Saharan Africa: The Role of Public Institutions

Abstract

ABSTRACT:We examine the impact of improved quality of exports on per capita income convergence between the United States (U.S.) and Sub-Saharan Africa (SSA) countries. We repeat that analysis for East Asian Tiger economies and SSA. We use a two-step system GMM estimator for dynamic panel models to test two hypotheses. First, that improved quality of exports increases per capita income convergence between the U.S. and the SSA region. Second, that the magnitude of the convergence is augmented by observed improvements in the quality of institutions and policy frameworks in the SSA region. Our findings show that improvements in the quality of food and livestock exports from SSA countries does indeed increase the rate of convergence in per capita GDP between the U.S. and SSA. Also, the convergence effect between the U.S. and SSA is observed with increased quality of manufactured exports from SSA, and it is about twice the effect obtained from increases in the quality of food and livestock exports. Similar results are obtained for convergence between the East Asian Tiger countries and the SSA region. In addition, the rate of convergence between the U.S. and SSA is highly augmented by increases in; anti-corruption efforts, ease of doing business, economic freedom, public investment in health, and progress in the quality of country policies and institutions. These results show that both food and livestock products, and manufactured goods, that are produced for export remain highly relevant for economic growth in the SSA region. International data shows that, when compared with the rest of the world, the SSA region scores low on these social and economic indicators. This underscores the importance of improving the quality of SSA public institutions to achieve sustainable, export-led economic growth.