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

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.