Monday, November 26, 2012

Is Africa doing much better than we thought?

When economic historians will look back at the global economy of last decade or two, they will likely summarize them as marked by a big recession in western economies, tremendous growth and convergence in Asia and South America, and stubborn lack of growth in Africa. As usual, one would say for Africa, which is a really frustrating continent.

Alwyn Young writes that this last assessment may be all wrong because the official statistics are biased downward. Looking at the consumption of durable like cell phones, cars, housing and health, as well as the use of time on the market by women (all reported by the Demographic and Health Survey), he finds that growth rates are more than triple what is indicated in the official statistics. How could they (or him) be so wrong? For one, price data is almost non-existent, which makes deflating nominal statistics rather hazardous. Second, it looks like the informal sector is being vastly underestimated. Mozambique and very recently Ghana have seen their GDP multiplied after the analysis of detailed surveys of their economies. If Young is right, Africa may not be quite catching up, but at least it is not losing ground.

2 comments:

Anonymous said...

I liked Alwyn Young's paper on China, when he found that China might have had had negative TFP growth after 1978. That's right, he found China was better off starving under the Gang of Four than under Deng Xiaoping or during the post-WTO manufacturing export behemoth...

According to Young, it's not China that's been booming, it's sub-saharan africa that's about to converge on western productivity standards...

Sometimes economists are drawn a touch too fervently to the counter-intuitive result...

Unknown said...

I really don't know what to make of Young's suggestion. Living on the ground in SSA, I wonder whether that finding is reflective of reality. Yes, there is a boom in mobile phone consumption and used cars from Europe but hardly any perceptible real improvement in standards of living. There is a booming informal sector which I would agree is far from being captured by existing growth calibration models. It may be wiser to look at changes in welfare in SSA rather than growth for no one really knows what the latter means.