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A sub-prime crisis in the U.S. and infant deaths in Africa

Shanta Devarajan's picture

The U.S. sub-prime crisis triggered a financial market meltdown which, in turn, has led to a global recession. These developments are already having a significant, negative effect on African economic growth (the latest World Economic Outlook  projects Africa’s growth rate in 2009 at 3.5 percent, down from 5.4 percent in 2008.) Drawing on the work of Jorge Arbache and John Page, I did the following calculation: If Africa experiences a growth deceleration that is typical of the average deceleration of the past, the infant mortality rate will rise by about 28 per thousand (see Table). Given that there are 28 million births a year in Africa, this translates to over 700,000 additional babies dying before their first birthday.

My colleague Matthias Lundberg did a somewhat different analysis by estimating the elasticity of infant mortality with respect to income worldwide, and then plugging in the IMF’s most recent forecasts for global income growth. He obtains an estimate for increases in infant deaths worldwide of 200,000-400,000 per year.

Needless to say, the two estimates represent different methods and even different data sources. The most important difference is that the Arbache-Page calculation is based on a particular definition of a growth deceleration (sometimes referred to as a growth collapse)—namely that the four-year forward moving average growth and per capita income are less than the four-year backward moving average—which Africa may experience but has not yet experienced from the global crisis. Meanwhile, Matthias’ calculation is looking at marginal changes in income and the association with infant mortality.

The differences between the two estimates highlight the fact that, when there is a lot of uncertainty, we should be careful about point estimates. Nevertheless, they indicate the order of magnitude involved and reinforce the point that we should do everything possible to avoid a growth collapse in Africa, lest the financial crisis become a human crisis.

Differences between sample averages, selected variables, SSA 1975-2005
  Growth acceleration Growth deceleration
  During Otherwise During Otherwise
Life expectancy (years) 51.3 50.1 48.1 51.0
Dependency ratio .91 .93 .93 .92
Under 5 mortality (per 1,000) 145.8 161.9 187.1 148.8
Infant mortality (per 1,000 live births) 84.3 93.9 113.2 85.5
Primary completion rate (% of relevant age group) 52.5 49.9 41.4 52.9
ODA (% GDP) 13.6 13.6 11.9 14.11
ODA per capita (US$) 68.3 53.2 41.5 61.2
Consumer price index (%) 15.1 75.2 177 23.2
Source: Arbache and Page (2007).    


Submitted by Vera on
Homi Kharas just wrote a piece for Brookings calling the WB to fast track aid resources. The new twist to Homi's call is that he is asking us not to fast new loans but to fast track disbursements. On the surface this would seem like a good idea. Make all the loans in the piple - this applies only to TA and investment projects of course - DPO types and we can disburse $33 billion according to Homi. The question I have is how much institutional development can we fast track? Should we just disburse the loan to Philippines Revenue agency, should the resources for the roads projects to Kenya be fast tracked by simplifying the procurement process and maybe even giving up on the idea of putting a road fund together? We must address these issues for Homi's suggestion to be a good one. That said I also think of the proposed $33 billion we may be able to fast tarck a portion of that with improved supervision and attention to projects. Clearly we need more discussion on the issue.

Submitted by Ramir on
Indeed, the financial crisis began to kill. And this is particularly terrible when it comes to children. Financial losses due to deceleration of economic growth will dramatically delay the slow process of eliminating poverty. The Director-General of UNESCO Matsuura K?ichir? calls for international measures to limit the impact of financial crisis for the poor countries.

Submitted by fast on
Yes, I agree with your Ramir. Financial losses will have a massive impact of countries already facing massive poverty, as the few people who are able to earn a little money are now loosing their jobs due to businesses going broke, and thus create unemployment, which obviously leads to poverty. Sad times indeed.

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