Powering structural transformation and productivity gains in Africa: The role of global value chains and resource endowments
Solomon Owusu
#2021-022
Sixty years ago, many countries in Africa implemented various industrial
policies to promote structural transformation and industrialization, all
aimed at generating productivity gains. Today, the consensus seems to be
that the region has since recorded moderate productivity gains and
industrialization remains elusive. Participation in global value chains
(GVC) has recently been highlighted as a pathway to fast-track
development in terms of productivity gains and structural change in the
region. This paper builds on these arguments and investigates how
participation in GVC affects aggregate labour productivity growth and
its two sub-components: within and structural change. It further
examines how this relationship differs with the extent of country’s
natural resource endowments. The results show that participation in GVCs
has a significant positive effect on productivity growth in Africa. This
gain is largely through backward participation and is stronger for
countries that are further from the productivity frontier. The analysis
using the sub-components of productivity growth also shows that GVC
participation has a positive and significant effect on productivity
growth by inducing an efficient reallocation of resources within sectors
(intra-sector reallocation) but not across sectors (inter-sector
reallocation). Moreover, these benefits arise mostly in non-resource
intensive and non-oil resource intensive countries. Overall, the results
indicate that GVC participation matters for productivity growth in
Africa but highlights differences in the channel of impact across
countries with different natural resource endowments.
Keywords: Global value chains, structural change, productivity, resource endowment, Africa
JEL Classification: C67, F15 O11, O13, O14, O47, O55