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Structural transformation in Africa

Remi Jedwab's picture

(Summary of Parallel Session 12 at the ABCDE, Paris)

While Sub-Saharan Africa was unurbanized at the turn of the 20th century, it has now a larger urban population than Northern America or Western Europe. First, most of African urban growth has been concentrated in time. Post-independence Africa has experienced amongst the highest rates of urban change ever registered. Its urbanization rate in 1900 was around 5.5%, which is equivalent to urbanization in the Middle Ages in Europe. It is now 44.9%, more or less what European countries achieved after the Second Industrial Revolution.  Second, African countries are highly urbanized compared to their level of economic development. The urbanization rate is estimated at 30.0% in India, 37.2% in Sub-Saharan Africa, and 46.9% in China in 2010 (United Nations 2009). But this performance masks large inequalities between coastal and landlocked countries, and natural resource exporters and other countries.  Figure 1 confirms that coastal and natural resource-exporting West African countries and regions are more urbanized.

Natural Resource Exports and Cities in West Africa, 2000



The typical African country is mainly rural, and a large share of its population still lives at the subsistence level. Low agricultural productivity and high internal trade costs are constraints on its structural transformation process, as people have to grow their own food and cannot move to cities. Besides, landlocked countries face high external trade costs and they cannot lift the food constraint by importing food to feed their urban workers. Governments can play a role by helping to remove the direct constraints that weigh on agricultural productivity (Gollin 2009). They can promote the use of high-yielding varieties, ensure an efficient management of agricultural research and extension services (RES) or realize investments in transportation infrastructure, etc. Gollin and Rogerson 2010 show how a rise in agricultural yields and lower transportation costs can trigger the structural transformation. Andrianarison, Davies and Dessy 2011 demonstrate that the lack of competition in the RES sector results in the underprovision of RES to smallholders. Indeed, the elite captures the gains associated with this sector if they control the parastatal RES companies. 

Cash Crop Exports (1900-2000) and Cities in Ghana and Ivory Coast (2000)

Then, as argued in Jedwab 2011, natural resource exporters can be highly urbanized, with only little change in food yields. Countries experiencing a natural resource boom obtain a surplus which they exchange against manufactured goods and food, which can then be used to pay workers in the local manufacturing sector or services. This drives urbanization, through consumption linkages. Figure 2 displays the total value of cocoa and coffee exports at the district level in 1900-2000 Ghana and Ivory Coast and cities in 2000. Clearly, most of urban growth happened in areas highly specialized in cash crops. Another issue is about the content of the structural transformation. Natural resource booms give consumption cities, with a very high employment share of non-tradable services. If learning-by-doing effects are lower in this sector compared to manufacturing or tradable services, natural resource exporters might be highly urbanized but their cities will be weak engines of growth. Yet, this needs not be the case if the surplus can fund the modernization of agriculture and encourage significant investments in human capital through the development of a sizable RES sector (Dessy, Pallage and Mbiekop 2010). 


1The urbanization rate in 2010 is 44.9% for coastal African Sub-Saharan Africa. Then, most of the highly urbanized African countries have either experienced a mining boom or a cash crop boom. 

References

Andrianarison, Francis, Davies, Victor, and Sylvain Dessy. 2011. « The Challenges to Agricultural Development in Sub-Saharan Africa. » Unpublished manuscript, Department of Economics, Université Laval, and African Development Bank.

Dessy, Sylvain; Pallage, Stéphane et Flaubert Mbiekop. 2010. "On the Mechanics of Trade-Induced Structural Transformation." Journal of Macroeconomics , vol. 32, no 1, pp. 251-264.

Gollin, Douglas, and Richard Rogerson. 2010 “Agriculture, Roads, and Economic Development: The Case of Uganda.” NBER Working Paper No. 15863.

Gollin, Douglas. 2009 “Agriculture as an Engine of Growth and Poverty Reduction,” commissioned paper for African Economic Research Consortium, Project on Understanding Links Between Growth and Poverty Reduction in Africa.

Jedwab , Rémi. 2011. « African Cities and The Structural Transformation : Evidence from Ghana and Sub-Saharan Africa. » Unpublished manuscript, Department of Economics, Paris School of Economics.

United Nations (2009): World Urbanization Prospects: The 2009 Revision. New York: United Nations, Department of Economic and Social Affairs.

 

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