Human Capital, Infrastructure and Export Diversification in Sub-Saharan African Countries

Alexis Habiyaremye, UNU-MERIT

This paper examines the extent to which dependence on primary commodities in Sub-Saharan African (SSA) countries can be explained by low levels of available human capital stock, physical infrastructure and capital investment. We examine the individual and combined effects of human capital stocks, physical infrastructure and capital accumulation as well as the influence of natural resources endowment on economic diversification. Following empirical evidence linking export diversification to better growth performance, we apply a lagged translog model to test the significance of these effects on a sample of SSA countries, in order to analyse to what extent they may help explain persistently weak growth performance in that region of the world. The abundance of natural resources and the low level of infrastructure turn out to be impeding diversification in SSA while the low level of human capital does not seem to form a limiting factor. These results are consistent with prior findings (e.g. Benhabib & Spiegel, 2002) that relatively low threshold levels of human capital and infrastructure are needed for technological learning and technology diffusion. These results suggest that SSA countries need to substantially increase their investments in basic infrastructure as well as reinforce the accumulation of sufficient stocks of human and physical capital to facilitate technological learning and reduce their dependence on primary commodities.

Date: 09 February 2006