Distortions to Agriculture and Economic Growth in Sub-Saharan Africa

To what extent has Sub-Saharan Africa's slow economic growth over the past five decades been due to price and trade policies that discouraged production of agricultural relative to non-agricultural tradables? This paper uses a new set of estimates of policy induced distortions to relative agricultural prices to address this question econometrically. First, the authors test if these policy distortions respond to economic growth, using rainfall and international commodity price shocks as instrumental variables. They find that on impact there is no significant response of relative agricultural price distortions to changes in real GDP per capita growth. Then, the authors test the reverse proposition and find a statistically significant and sizable negative effect of relative agricultural price distortions on the growth rate of Sub-Saharan African countries. The fixed effects estimates yield that, during the 1960-2005 period, a ten percentage points increase in distortions to relative agricultural prices decreased the region's real GDP per capita growth rate by about half a percentage point per annum.

Bibliographic Details

Main Authors:	Anderson, Kym, Brückner, Markus
Language:	English en_US
Published:	World Bank, Washington, DC 2012-09
Subjects:	ABSOLUTE TERMS, ABSOLUTE VALUE, ADJUSTMENT COSTS, AGRICULTURAL GROWTH, AGRICULTURAL OUTPUT, AGRICULTURAL PRICE, AGRICULTURAL PRICES, AGRICULTURAL PRODUCTION, AGRICULTURAL SECTOR, AGRICULTURAL TRADE, AGRICULTURE, AVERAGE INCOME, AVERAGE INCOMES, AVERAGE SHARE, BIDDING, BOND, BUSINESS CYCLE, CAPITAL ACCUMULATION, CAPITAL STOCK, CIVIL WAR, COMMODITIES, COMMODITY, COMMODITY EXPORT, COMMODITY EXPORTS, COMMODITY PRICE, COMMODITY PRICES, CONSUMERS, CONSUMPTION GROWTH, COUNTRY CASE, COUNTRY FIXED EFFECTS, COUNTRY LEVEL, COUNTRY SPECIFIC, CROSS-COUNTRY DIFFERENCES, DATA MODEL, DATA SET, DEPENDENT VARIABLE, DESCRIPTIVE STATISTICS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ASSISTANCE, DEVELOPMENT ECONOMICS, DEVELOPMENT INDICATORS, DEVELOPMENT POLICY, DEVELOPMENT RESEARCH, DOWNWARD BIAS, DYNAMIC PANEL, ECONOMETRIC MODEL, ECONOMETRIC MODELS, ECONOMETRICS, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC REVIEW, ECONOMICS LITERATURE, EMPIRICAL ANALYSIS, EMPIRICAL EVIDENCE, EMPIRICAL LITERATURE, EMPIRICAL RESULTS, EMPIRICAL SUPPORT, ERROR TERM, ESTIMATED COEFFICIENT, ESTIMATED COEFFICIENTS, ESTIMATION TECHNIQUES, EXCHANGE RATE, EXOGENOUS CHANGES, EXPENDITURE, EXPLANATORY VARIABLE, EXPORT TAXES, EXPORTS, EXTERNALITIES, FINANCIAL SUPPORT, FIXED CAPITAL, FIXED EFFECTS, FIXED EFFECTS ESTIMATION, FOREIGN EXCHANGE, FREE MARKET, FUNCTIONAL FORM, GDP PER CAPITA, GENERAL EQUILIBRIUM ANALYSIS, GLOBALIZATION, GOVERNMENT EXPENDITURES, GROWTH DATA, GROWTH DYNAMICS, GROWTH EFFECT, GROWTH LITERATURE, GROWTH PERFORMANCE, GROWTH RATE, GROWTH RATES, GROWTH REGRESSIONS, IMPERFECT COMPETITION, IMPORT TARIFFS, INDUSTRIALIZATION, INEQUALITY, INTERNATIONAL COMPARISONS, INTERNATIONAL MARKET, INTERNATIONAL TRADE, LABOR FORCE, LONG-RUN GROWTH, MACROECONOMICS, MARGINAL EFFECT, MARKET EQUILIBRIUM, MINIMUM LEVEL, NATURAL RESOURCE, NEGATIVE COEFFICIENT, NEGATIVE EFFECT, NEGATIVE GROWTH, 0 HYPOTHESIS, OUTPUT GROWTH, OVERVALUED EXCHANGE, OVERVALUED EXCHANGE RATES, PANEL REGRESSIONS, PER CAPITA GROWTH, PER CAPITA GROWTH RATE, POLICY DISCUSSIONS, POLICY REFORM, POLICY RESEARCH, POLITICAL ECONOMY, POLITICAL INSTITUTIONS, POLITICAL REGIME, POSITIVE COEFFICIENT, POSITIVE EFFECT, POSITIVE GROWTH, POVERTY REDUCTION, PRICE DISTORTIONS, PRICE INDEX, PRICE INDICES, PRICE POLICIES, PRIMARY PRODUCTS, PRIVATE CONSUMPTION, PRODUCER PRICES, PRODUCTIVITY GROWTH, REAL GDP, REAL INCOME, RELATIVE CONTRIBUTIONS, RELATIVE PRICES, SERIAL CORRELATION, SERIES DATA, SHORT-RUN GROWTH, SIGNIFICANCE LEVEL, SIGNIFICANT EFFECT, SIGNIFICANT IMPACT, SIGNIFICANT NEGATIVE, SIGNIFICANT REDUCTIONS, STANDARD DEVIATION, STRUCTURAL CHANGE, SUPPLY CHAIN, TAX, TAXATION, TRADABLE SECTORS, TRADE LIBERALIZATION, TRADE OPENNESS, TRADE POLICIES, TRADE POLICY, TRADE TAXES, UNDISTORTED PRICES, UNEMPLOYMENT, URBANIZATION, VALUE ADDED, WORLD DEVELOPMENT INDICATORS, WORLD ECONOMY, WORLD TRADE, WORLD TRADE ORGANIZATION, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2012/09/16762995/distortions-agriculture-economic-growth-sub-saharan-africa https://hdl.handle.net/10986/12059
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