Structural Change in Sub-Saharan Africa: An Open Economy Perspective

RePEc Short ID: pde627
ORCID iD: 0000-0003-4166-8173

Kruse, Hagen; Mensah, Emmanuel; Vidogbena, Yabo; Yi, Kei-Mu; de Vries, Gaaitzen

doi:10.24149/wp2418

Working Paper

Structural Change in Sub-Saharan Africa: An Open Economy Perspective

Abstract: We study the evolution of manufacturing value added shares in 11 sub-Saharan African (SSA) countries through the lens of an open economy model of structural change. Our analysis leverages recent developments in input-output tables in SSA countries. Our model allows for income effects via non-homothetic preferences, substitution and relative price effects, as well as comparative advantage and specialization effects. We calibrate our model to include each SSA country with nine other major economies for each year between 2000 and 2018. We also do a similar set of calibrations for 11 developing Asian (DA) countries. Our main results are that domestic and foreign sectoral TFP are important drivers of structural change. Trade integration over time plays only a small role. However, trade is important as a transmission mechanism of foreign productivity trends. Finally, the drivers and mechanisms of industrialization are broadly similar in low-income SSA and DA countries.

Keywords: international trade; structural change; input-output; low-income countries;

JEL Classification: F11; F43; O11; O41;

https://doi.org/10.24149/wp2418