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

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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.

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  • Gaaitzen de Vries & Hagen Kruse & Emmanuel Mensah & Yabo Vidogbena & Kei-Mu Yi, 2024. "Structural Change in Sub-Saharan Africa: An Open Economy Perspective," Working Papers 2418, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:99314
    DOI: 10.24149/wp2418
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    Keywords

    international trade; structural change; input-output; low-income countries;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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