View
0
Download
0
Category
Preview:
Citation preview
Fosu / UNU-WIDER
Institutions, Governance and Economic Development in Africa: A Review
By
Augustin Kwasi FOSU
Deputy DirectorUN University-WIDER
Helsinki, Finland
Presentation at the European Development Institute
Workshop on ‘Transforming Structures: Security, Institutions, and Regional Integration Mechanisms’
Florence, Italy, 16-17 April 2009
Fosu / UNU-WIDER
Outline• Introduction• SSA Economic Development Performance• Governance/Institutions =? • SSA Governance/Institutional Performance• The New Institutional Economics and Development• Political Institutions and Developmental Governance• Political Accountability, Disorder and Growth• Political Instability and Growth in SSA• Institutional Quality and the Resource Curse• Ethnicity, Gov./Institutions and Econ Performance• Gov./Institutions and Transforming Growth to Dev.• The Challenges and Conclusions
– The Policy Syndromes: SF vs. SB– Does governance/institution matter?– Is democracy the answer?– The political incentive challenge!
Fosu / UNU-WIDER
Introduction
• Explaining the African Development Record – Colonial institutions (Acemoglu et al., 2001, AER) – Geography (Bloom and Sachs, 1998, BPEA)– Institutions rule! (Rodrik et al., 2004, JEG) – Slave trade (Nunn, 2008, QJE) – SSA sample– Malaria rules! (Bhattacharyya, 2009, JAE) – SSA sample
• The (AERC) Growth Project– Policy syndromes (PS) have been a major deterrent to growth (PS= state controls; adverse redistribution; sub-opt. inter-temp
allocation; and state breakdown; complement = syndrome-free)– PS may be endogenous to governance and institutions– Publications: Fosu & O’Connell (2006, ABCDE); Ndulu et al.,
(2008a,b, Cambridge)
Economic Development, SSA vs. World(Evolution of PC Income, US$)
Fosu / UNU-WIDER
GDP per capita (constant 2000 US$), 1960-2007
SSA
World
0
1000
2000
3000
4000
5000
6000
7000
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
$
Fosu / UNU-WIDER
Economic Development, SSA vs. World (2)(Evolution of PC Income, PPP)
GDP per capita, PPP (constant 2005 int´l dollars), 1980-2007
SSA
World
0100020003000400050006000700080009000
1000019
80
1983
1986
1989
1992
1995
1998
2001
2004
2007
$
Economic Development, SSA vs. World (3)(Evolution of PC Income Growth )
Fosu / UNU-WIDER
GDP per capita growth, 1961-2007
SSA
World
-5
-3
-1
1
3
5
7
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
%
Economic Development SSA vs. World (4)(Evolution of Life Expectancy )
Fosu / UNU-WIDER
Life Expectancy at Birth (yrs.), 1960-2006
SSA
World
010203040
50607080
19
60
19
63
19
66
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
Fosu / UNU-WIDER
SSA Economic Development Level, Top 10
2007 2006 2006 GDP per capita, PPP Life expectancy Infant Mortality
Eq. Guinea (28923) Mauritius (73) Mauritius (13) Gabon (14325) Mauritania (64) Namibia (45)
Botswana (12664) Comoros (63) Eritrea (48) Mauritius (10647) Senegal (63) Comoros (51)
South Africa (9191) Ghana (60) South Africa (56) Angola (5161) Gambia (59) Senegal (60)
Namibia (4883) Madagascar (59) Gabon (60) Swaziland (4639) Togo (58) Sudan (61)
Congo, Rep. (3316) Sudan (58) Zimbabwe (68) Cameroon (2005) Eritrea (57) Togo (69)
SSA Mean 1865 50 94
SSA Median 1201 51 89
SSA Economic Development Level, Bottom 10
Fosu / UNU-WIDER
2007 2006 2006 GDP per capita, PPP Life expectancy Infant Mortality
Ethiopia (736) Rwanda (46) Mali (119)Malawi (713) Liberia (45) Guinea-Bissau (119)
CAR (674) CAR (44) Burkina Faso (122)Sierra Leone (639) Lesotho (43) Eq. Guinea (124)
Niger (592) Zimbabwe (43) Chad (124)Eritrea (491) Mozambique (42) Congo, Dem. Rep. (129)
Guinea-Bissau (451) Angola (42) Niger (148)Liberia (338) Sierra Leone (42) Angola (154)
Burundi (322) Zambia (42) Liberia (157)Congo, Dem. Rep. (282) Swaziland (41) Sierra Leone (159)
SSA Mean 1865 50 94
SSA Median 1201 51 89
Institutions and Governance =?
Fosu / UNU-WIDER
• Governance -The processes of decision-making and implementation (political and economic), e.g., democratic governance as measured by electoral competiveness
• Institutions – ‘The rules of the game…or humanly devised constraints that shape human interaction…’(North, 1990: 3-5) (market, non-market; economic, political, sociological, etc.), e.g., rule of law, constraint onthe executive.
Fosu / UNU-WIDER
Governance/Institutional Evolution, SSA vs. World Index of Electoral Competitiveness (IEC)
IEC, 1975-2006
IEC_World
IEC_SSA
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
Fosu / UNU-WIDER
Governance/Institutional Evolution, SSA vs. WorldExecutive Constraint (XCONST)
XCONST, 1960 - 2007
XCONST_World
XCONST_SSA
XCONST_China
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
Governance/Institutional Evolution, SSA vs. WorldRule of Law
Fosu / UNU-WIDER
Rule of Law, 1996 - 2007
Rule of Law _SSA
Rule of Law _World
Rule of Law _China
-1.00
-0.80
-0.60
-0.40
-0.20
0.00
19
96
19
98
20
00
20
02
20
03
20
04
20
05
20
06
20
07
SSA Governance/Institutional Indicators, Top 10 performers
Fosu / UNU-WIDER
2007 2007 2006 XCONST Rule of Law IEC
Botswana (7) Swaziland (0.79) CAR (7) Comoros (7) Mauritius (0.76) Chad (7) Lesotho (7) Botswana (0.62) Comoros (7)
Mauritius (7) Ghana (0.40) Ghana (7) South Africa (7) Namibia (0.32) Guinea-Bissau (7)
Kenya (6) South Africa (0.26) Ivory Coast (7) Liberia (6) CAR (-0.28) Kenya (7) Malawi (6) Ethiopia (-0.28) Liberia (7)
Senegal (6) Benin (-0.30) Madagascar (7) Sierra Leone (6) Lesotho (-0.30) Malawi (7)
SSA Mean 4.05 -0.78 5.98
W’ld Mean 4.92 0.00 6.09
SSA Governance/Institutional Indicators, Bottom 10 performers
Fosu / UNU-WIDER
2007 2007 2006 XCONST Rule of Law IEC Cameroon (2) Congo, Rep. (-1.38) Uganda (6)
Chad (2) Guinea-Bissau (-1.39) Burkina Faso (5)Congo, Rep. (2) Rwanda (-1.45) Burundi (5)
Eq. Guinea (2) Sudan (-1.46) Eq. Guinea (4.5)Eritrea (2) Cameroon (-1.50) Sudan (4)Gabon (2) Angola (-1.53) Swaziland (3)
Gambia (2) Ivory Coast (-1.68) Angola (3)Sudan (2) Congo, Dem. Rep. (-2.06) Eritrea (2)
Swaziland (2) Somalia (-2.10) Congo, Dem. Rep. (1.5)Togo (2) Liberia (-2.27) Mauritania (1.5)
SSA Mean 4.05 -0.78 5.98W’ld Mean 4.92 0.00 6.09
he New Institutional Economics and Economic Development
• The ‘New Institutional Economics’– Institutions, especially political ones, are key to economic
development– Institutions should provide incentives for developmental
governance leading to optimal development outcomes
• Corollary: Institutions represent a potential antidote to the post-independence personalized political authority of a patron-client relationship – ‘neo-patrimonial governance’.
Fosu / UNU-WIDER
Political Institutions and Developmental Governance in SSA (Alence, 2004, JMAS)
• Democratic institutions greatly improve ‘developmental governance ’ (p. 176): economic policy coherence (free market), public-service effectiveness, & limited corruption
• Democratic contestation (i.e., unrestricted political contestation with meaningful executive restraints) considerably improves dev. governance quality, mainly through a reduction in corruption
• Executive restraints greatly improve dev. governance quality, mainly via economic policy coherence and public-service effectiveness
• Restricted political contestation has little direct impact on dev. governance
• Political contestation and executive restraints are reinforcing in positively influencing dev. governance quality
• Executive restraints improve dev. governance even if there is little political contestation
Fosu / UNU-WIDER
Political Accountability, Political Disorder and Growth in SSA (Bates, 2006, JAE)
• Political contestability (PC) intended for political accountability and hence developmental governance
• PC need not be growth-enhancing, however, for:
• 1. Political accountability may lead to growth-adverse policies
• 2. PC likely to result in political disorder
Fosu / UNU-WIDER
Political Instability and Growth in SSA
• Institutional arrangement rendered the military the only real check for executive authority, resulting in elite PI (EPI) (Fosu, 2008a, Camb.)
• EPI was rampant in SSA during post-independence (McGowan, 2003, JMAS), thanks to available rent opportunities (Kimenyi & Mbaku, 1993, Pub Choice; Fosu, 2003, JDS)
• EPI has been adverse to growth (Fosu, 1992, EDCC; 2002, JDS; 2001, AJES; Gyimah-Brempong &Traynor, 1999, JAE)
Fosu / UNU-WIDER
Institutional Quality and the Resource Curse
• The ‘resource curse’ (RC) is primarily an institutional-quality problem (Mehlum et al, 2006, EJ)
• RC is alive and well in African economies primarily via fostering conflict and bad governance (Collier & Hoeffler, 2005, JCR), which can be adverse to growth (Collier & Hoeffler, 1999, OEP)
Fosu / UNU-WIDER
Ethnicity, Governance/Institutions and Economic Performance
• Democracy (political rights) can reduce the negative growth effect of ethnic diversity (Collier, 2000, E&P)
• Higher institutional quality limits the adverse growth impact of ethnic diversity (Easterly, 2001, EDCC)
• Executive constraint (XC) mitigates the pernicious effects of ethnic diversity in SSA via its ability to reduce policy syndromes and raise TFP (Fosu, 2009, CSAE Conf.)
Fosu / UNU-WIDER
Governance/Institutions and Transforming Growth to Development
• EPI reduces the rate at which growth is transformed to human development (HD) – HDI & non-income components of HDI - in SSA (Fosu, 2002, ODS; 2004, AJES)
• Democracy raises HD – L Exp & Literacy - even when PC GDP is accounted for (Vollmer & Ziegler, 2008, mimeo)
• Democracy increases the rate at which growth is transformed to HD – HDI & L Exp - in SSA (Fosu, 2005, mimeo)
Fosu / UNU-WIDER
The Challenges and Conclusions SF vs. SB (note: unadjusted rel. frequencies)
Fosu / UNU-WIDER
Evolutions of Syndrome-free and State Breakdown regimes, 1960-2000 (%)
SF
SB0
102030405060
1960
-65
1966
-70
1971
-75
1976
-80
1981
-85
1986
-90
1991
-95
1996
-00
SF
051015202530
SB
The Challenges and Conclusions (2)Raising SF while lowering SB
1.ncrease SF (0.27), i.e., free from :•tate Controls (0.33)•dverse Redistribution (0.21)•uboptimal Inter-temp Allocation (0.08) •State Breakdown (0.10)
. Decrease the likelihood of SBFosu / UNU-WIDER
Challenges and Conclusions (3)Might governance/institutions help?
Fosu / UNU-WIDER
Evolutions of Syndrome-free (SF) and Executive Constraints (XC), 1960-2004
SFSF
XCXC
0102030405060
1960
-65
1966
-70
1971
-75
1976
-80
1981
-85
1986
-90
1991
-95
1996
-00
2001
-04
SF
(%
)
1.0
2.0
3.0
4.0
XC
The Challenges and Conclusions (4)How can governance/institutions help?
•olitical contestation raises accountability but need not increase growth & dev (G&D) (Bates, 2006, JAE)•emocracy (p rights) can increase G&D by reducing the negative effect of ethnicity (Collier, 2000, E&P)•C may raise G&D via increasing developmental governance: econ. policy coherence & public-service effectiveness (Alence, 2004, JMAS)•educing PI can increase the transformation rate of growth to HD (Fosu, 2002, ODS; 2004, AJES)•dvanced electoral contestation can raise G&D (Fosu, 2008, EL)
Fosu / UNU-WIDER
The Challenges and Conclusions (5)Is democracy the answer?
• ‘Good governance’ (developmental governance) appears necessary for G&D
• But is democratization desirable for G&D?• That depends on the level of democracy and the
likelihood of transcending the threshold • Country-specific institutional factors should matter for the
optimal strategy• XC seems more critical than pol. contestation per se• Meanwhile, assistance needed for countries to transcend
the threshold, including incentives for political agents
Fosu / UNU-WIDER
Recommended