Are Policy Reform and Growth in Africa Sustainable?

Abstract

This paper, relying on the results of several cross-sectionnal growth regressions, examines the factors determining the sustainability of policy reforms and growth in Africa. Five structural factors are considered as determinants of policy: 1) ethno-linguistic fragmentation, which influences growth directly rather than through policy, 2) human capital, which due to its low level is an impediment to good policy, although its effect is in all likelihood waning, 3) vulnerability to external shocks, possibly dampened thanks to better management and democratization, 4) political factors, mainly political instability and violence, which themselves partly depend on the previous factors, 5) foreign aid which could be allocated and "conditionned" so as to be more conducive to policy reform and growth. A simplified structural model of growth and policy, estimated in first differences and by GMM, and supplemented by an estimate of a political instability function, summarizes the main lines of our arguments.