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Globalization and Economic Growth in Sub-Saharan Africa
Globalization and Economic Growth in Sub-Saharan Africa
2010
Barry, Hadiatou (2010) "Globalization and Economic Growth in Sub-Saharan Africa," Gettysburg Economic Review: Vol. 4 , Article 4.
Available at: https://cupola.gettysburg.edu/ger/vol4/iss1/4
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Globalization and Economic Growth in Sub-Saharan Africa
Abstract
This study analyzes Sub-Saharan Africa through the framework of globalization. The study‘s objective is to
determine whether globalization is a significant factor when associated with economic growth in the region.
Using panel data from 1995-2005 for 41 countries and the KOF globalization index, an Ordinary Least
Squares (OLS) model was employed to examine the relationship between globalization and other traditional
factors of economic growth such as trade, foreign direct investment, loans, aid, natural resources, corruption,
and rule of law. The study shows that globalization has a positive, though statistically insignificant impact on
the economic growth of Sub-Saharan Africa. However, globalization is positive and statistically significant for
countries with scarce natural resources. I interpret these results as proving that the leading causes of slow
economic growth in Sub-Saharan African countries is due to heavy dependence on natural resources, low
investment in human capital, and the negligence of other industries—all of which suggest that these countries
are unable to effectively manage critical processes of globalization. Indeed, in order to reap the net benefits of
globalization, I argue, African countries need to work towards economic stability by developing better
macroeconomic policies for their future.
Keywords
globalization, international trade, natural resources, imports, foreign aid, economic growth
Abstract
This study analyzes Sub-Saharan Africa through the
framework of globalization. The study‘s objective is to determine
whether globalization is a significant factor when associated with
economic growth in the region. Using panel data from 1995-2005
for 41 countries and the KOF globalization index, an Ordinary
Least Squares (OLS) model was employed to examine the
relationship between globalization and other traditional factors of
economic growth such as trade, foreign direct investment, loans,
aid, natural resources, corruption, and rule of law. The study
shows that globalization has a positive, though statistically
insignificant impact on the economic growth of Sub-Saharan
Africa. However, globalization is positive and statistically
significant for countries with scarce natural resources. I interpret
these results as proving that the leading causes of slow economic
growth in Sub-Saharan African countries is due to heavy
dependence on natural resources, low investment in human capital,
and the negligence of other industries—all of which suggest that
these countries are unable to effectively manage critical processes
of globalization. Indeed, in order to reap the net benefits of
globalization, I argue, African countries need to work towards
economic stability by developing better macroeconomic policies
for their future.
1
Acknowledgement: I am grateful for the help of my globalization
studies‘ advisor Professor Donna Perry and Professor Monica Ogra. I am also
grateful for helpful suggestions by my economics‘ advisor Professor Mark
Hopkins, econometric Professor Zhining Hu, and Professor Linus Nyiwul. All
errors are mine.
42
Introduction
43
control and labor markets, reductions of all kinds of state
44
and privatization of government enterprises and by helping
globalization.
2
I wanted to use data for all of Sub-Sahara Africa, but due to the lack
of data for the variables employed in this paper, I was limited to 41 countries.
45
might be. I used the KOF globalization index to measure
46
African nations. Furthermore, I attempt to explain how
47
have high economic growth. The empirical findings from
significant.
research.
48
I. Literature review
50
position as economically disadvantaged. These scholars
51
trade and investment, economic growth is the only way to
globalization.
52
dependence on natural resources. Necessary steps must be
53
Regression, under the Gaus-Markov assumptions. The model
is specified as:
B11Corrupt + ϵ
(1)
variables are not correlated with one another since the mean
vif is 2.58; all the variables have a vif less than 10. Also, I
54
the explanatory variables, i.e. the variance of the unobserved
problem of heteroskedasticity.
55
―Loans per capita‖ are measured in terms of IBRD
Africa.
56
to determine their impact separately on economic growth.
higher rate. However, this has not been the case for Africa;
instead of export.
International.
57
Africa experience lower levels of education than those in
58
natural resource curse or Dutch Disease3 effect of the
3
The Dutch disease is a theory that explains that countries that are
wealthy in natural resources tend to have a decrease in manufacturing industries
causing them to become less competitive because they neglect those industries—
manufacturing or agriculture in the case of Africa. Indeed, manufacturing and
agriculture are essential to a country‘s economic growth.
59
―The lagGDP‖ is also included to measure the effect
vary across countries but not so much over time, since only a
loans, FDI, and trade (export and import) are taken from the
60
Worldwide Governance Indicators, and the corruption index
III. Results
(2)
The results from the model used here indicate that
of year one minus log GDP of year two against lag trade,
which is the past term of trade, and lag global, which is the
62
resources in comparison with countries that export less than
effect for this model. The results show (see table 3) that in
statistically insignificant.
63
scholars, aid is one of the major conventional investments
64
Africa is now below 1 percent and falling. Asiedu (2005)
because they import much more than they export. Hence, the
65
and exports, but it is statistically insignificant (p-value
which is the key growth sector for the expansion of trade and
66
growth, which is what is expected from such study.
67
decision. The coefficient is negative (-0.007122) and
the world.
IV. Discussion
68
main goal of this study has been to investigate the effect of
(Schneider, 2003).
69
Globalization can be a catalyst for economic growth.
Africa that did not fall victim to the natural resource curse
70
Korea because taxes and subsidies were accompanied by
71
resources. Sachs and Warner (1997) pointed out that high
72
agricultural sector. Trans-border inflows of agricultural
industries.
73
Other scholars found that FDI is largely driven by natural
74
manufacturing and infrastructural sectors and not into
75
growth. There are many other proposed hypotheses as to
(Barbier, 2005).
76
will continue to hinder economic performance. Figure 1
77
Botswana
6 Botswana
Botswana
Botswana
Botswana
South Africa Botswana
South Africa
Cape Verde
5
Mauritius SouthSouth
AfricaAfrica
South Africa
Mauritius
Cape Verde South Africa
South Africa
Mauritius
Mauritius
Seychelles South
South Africa
Africa
Mauritius Zimbabwe
Mauritius
Malawi Zimbabwe
4
Seychelles
Ghana
Ghana
Lesotho Ethiopia
Mozambique
Burkina Senegal Ghana
Faso Zambia
Benin Senegal Ghana
Senegal Ghana Mali Gabon
Madagascar
Cote
Rwandad'Ivoire
Senegal Mauritania
3
Lesotho
Lesotho Burkina
Rwanda
Malawi Burkina
Benin Faso
RwandaSenegal
Faso Mali
Tanzania Mali Gabon
Gambia
MalawiMadagascar
Mozambique
Uganda
Gambia Swatziland
Cote
Mozambique
d'IvoireZimbabwe
Togo Mauritania
Tanzania
Tanzania
Eritrea
KenyaMadagascar
Gambia Swatziland
Cote
Uganda
Swatziland
Ethiopia
Rwandad'IvoireZimbabwe Mauritania
Uganda Mauritania
Tanzania Zambia
Zambia
Togo Cameroon
Central African Republic Sierra Leone
Kenya Ethiopia
Burundi
Guinea-Bissau
Zimbabwe
Togo Congo,
Sierra
Sudan
Rep.Leone
Kenya Ethiopia
Uganda
Cote
Uganda
d'Ivoire Cameroon
Cameroon Congo, Rep.Sierra
Liberia
Sudan
SudanLeone
Congo,
Liberia Dem. Rep
2
Kenya
Guinea-Bissau
Kenya Cote d'Ivoire Tanzania Central African Republic Congo,
Angola
GuineaAngola
Dem. Rep
Nigeria
Chad Madagascar Cameroon Angola
Nigeria
Angola
Guinea
Liberia
Cameroon Guinea
Nigeria
Cameroon Nigeria
1
Cote d'Ivoire
Nigeria
0 20 40 60 80 100
mineral Industry (% of export)
78
simply globalize in order to stimulate growth and reduce
countries that are less globalized are highly corrupt. This can
corrupt the country is, 1 being the most corrupts and 6 being
Botswana
Botswana
6
Botswana
Botswana
Botswana
Botswana
Botswana
South Africa
South Africa
Cape
Cape
Cape Verde
Verde
Verde
5
Seychelles
Seychelles
Seychelles
Ghana
Ghana
Ethiopia Lesotho
BurkinaMozambique
FasoZambia
Senegal Zambia
Ghana
Benin
Benin Gabon
Ghana
Senegal
Gabon
Ghana Senegal
Mali Ghana
Senegal
Rwanda MadagascarCote d'Ivoire
Mauritania
Senegal
3
Rwanda
Rwanda Burkina
Tanzania Burkina
Burkina
Benin Mali
Mali
Faso
Mali Faso
FasoLesotho
Lesotho
Malawi LesothoSenegal
Gabon
Gabon
Uganda Tanzania Tanzania
Madagascar
Malawi Malawi
Malawi
Malawi
Mauritania
ZimbabweTogo Mozambique
Cote Mozambique
Mozambique
Swatziland
Mozambique
d'Ivoire
GambiaGambia
Rwanda Uganda
Madagascar
Tanzania Eritrea
Eritrea
Ethiopia
KenyaEritrea
Eritrea
Uganda Uganda
Cote
Mauritania
Zimbabwe
d'Ivoire
MauritaniaSwatziland
Zambia
Zambia
Zambia
Swatziland
Zambia
Gambia
Swatziland
Gambia
Central Cameroon
African Republic
Sierra
Sierra
TogoTogo
Leone
Leone
Burundi
Sierra Leone
Sudan Ethiopia
Kenya Congo,
Congo,
Togo
Zimbabwe
Rep.
Rep.
Zimbabwe
Congo, Dem.SierraUganda
RepLeone
Sudan
Liberia
Liberia
Sudan
Sudan Ethiopia
Uganda
Uganda Congo,
Cameroon
Guinea-Bissau
Cameroon
Rep.
Cameroon
Kenya
Kenya
Cote d'Ivoire
2
Congo,
Congo,
Central
Congo,
Central Dem.
Dem.
African
Dem.
African
Central
Tanzania Rep
Rep
Rep
GuineaRepublic
Republic
African
Guinea Republic
Guinea-BissauKenya
Guinea-Bissau
Guinea-Bissau
Kenya
Nigeria NigeriaAngola
Kenya Cote d'Ivoire Angola
Madagascar
Chad
Chad
Liberia
Liberia Chad Cameroon
GuineaNigeria Angola
Angola
Guinea
Cameroon Nigeria
Nigeria
Nigeria
Cameroon Nigeria
1
Cote d'Ivoire
Nigeria
20 30 40 50 60 70
Global index
79
Globalization is also a means to achieve good
economic growth.
80
Globalization is also meant to provide physical
81
and power in the international economy (Ajayi, 2003). There
globalization.
V. Conclusion
82
take the necessary steps to reevaluate macroeconomic
from globalization.
83
its positive net benefit to economic growth. Globalization
84
Reference:
86