Sub-Saharan African countries have become less productive relative to global efficiency benchmarks over past decades. These countries are not where they aspire to be. The persistence of this productivity gap is due to the slow accumulation of physical and human capital relative to the region’s growing population, and the poor allocation of these resources. In other words, the problem of low endowments of physical and human capital is made worse by its inefficient allocation.
Policies and institutions have affected output and productivity through three interconnected channels:
(a) technology, as reflected in the level of productivity of each producer in the economy;
(b) selection, i.e., choice of producers that would operate in the industry given the entry costs, and their level of productivity; and,
(c) misallocation, i.e., inefficient allocation of capital and labor among operating producers.
A wide array of policies can be put in place to correct these distortions and the misallocation of resources that are holding back productivity growth. These distortions include restricted access to credit, land market imperfections, lack of market contestability, inadequate enforcement of property rights, and size-dependent tax policies, among others.
This month’s essential reading list features publications that contribute to the vast literature on the role of misallocation in explaining aggregate productivity losses. It also includes policies and institutions that can help farmers and firms allocate their resources more efficiently. Finally, we present a selection of articles that discuss the broader jobs agenda, as well as COVID-19 related articles.
Boosting productivity in Sub-Saharan Africa
This book examines the aggregate productivity consequences of production decisions across agricultural farms and manufacturing firms in Sub-Saharan Africa. (Calderon, World Bank, January 2022)
- This paper uses comprehensive and comparable firm-level manufacturing censuses from four Sub-Saharan African countries to examine the extent, costs, and nature of within-industry resource misallocation between heterogeneous production units. (Cirera et al., World Bank, February 2020)
- This paper uses data from the World Bank Enterprise Survey on 125,000 firms in 140 countries and investigates how tax enforcement and compliance vary with firm size, as well as the macroeconomic implications of this heterogeneity. (Bachas et al., Journal of Development Economics, September 2019)
- The model used in this paper captures several mechanisms through which correlated distortions can affect productivity and establishment size. (Bento & Restuccia, American Economic Journal: Macroeconomics, July 2017)
- This paper emphasizes the importance of comprehensive reforms in the rental market that go beyond the issuance of certificates in order to reduce frictions in land transactions. (Chen et al., Review of Economic Dynamics, April 2021)
- In this paper, microdata on manufacturing establishments is used to quantify the potential extent of misallocation in China and India versus the United States. (Hsieh and Klenow, The Quarterly Journal of Economics, November 2009)
- In this article, a quantitative framework is used to explain the relationship between aggregate/sector-level total factor productivity (TFP) and financial development across countries (including US, Mexico and other OECD countries). (Buera et al., American Economic Review, August 2011)
- This paper summarizes the literature on misallocation as a significant channel in explaining productivity differences across countries. (Restuccia & Rogerson, Journal of Economic Perspectives, Summer 2017)
- This paper develops a general equilibrium theory of aggregation in inefficient economies. (Baqaee & Farhi, National Bureau of Economic Research, November 2017)
Broader jobs agenda
- Cross-country labor productivity gaps in manufacturing are larger than in the aggregate and there is no tendency for manufacturing labor productivity to converge. (Herrendorf et al., National Bureau of Economic Research, March 2022)
- This report identifies four megatrends that are expected to have an impact on Thailand's growth and competitiveness prospects. (Frias et al., World Bank, February 2022)
- This book examines the trends, determinants, and impacts of high-skilled worker migration within the European Union over the last two decades.. (Bossavie et al., World Bank, March 2022)
- Simply having a job is not enough. What matters is having a job good enough to escape poverty and to generate a meaningful income.. (Sharma et al., World Bank, March 2022)
- This paper identifies four key findings including: i) The convergence of global effective tax rates on labor and capital due to a 10-percentage-point increase in labor taxation and a 5-percentage-point decrease in capital taxation; ii) declining capital taxation in high-income countries; iii) tax-capacity effect of international trade explains the rise in capital taxation in developing countries; iv) international economic integration reduces statutory tax rates, due to increased tax competition. (Bachas et al., National Bureau of Economic Research, March 2022)
- This book seeks to advance understanding of the agribusiness sector's (primary agriculture and off-farm agribusinesses) potential to contribute to Nigeria's economic diversification. (Mghenyi et al., World Bank, March 2022)
- This paper investigates the labor market outcomes for refugee and urban communities in Kenya during the COVID-19 pandemic.. (Vintar et al., World Bank, March 2022)
- This brief emphasizes that, in a growing digital economy, consumers and businesses demanding more internet connectivity and services, and an overall increased emphasis on data security are expected to contribute to robust long-run demand for these workers. (Hylton et al., U.S. Bureau of Labor Statistics, February 2022)
- Automation of routine jobs will result in mass layoffs and a reduction in professionals as the technology they use becomes obsolete. (Milosevic et al., Ecoforum, February 2022)
- This paper investigates the effect of broadband on rural employment rates in April and May of 2020. (Isley & Low, Telecommunications Policy, August 2022)
This blog is based on the March 2022 edition of the Knowledge4Jobs newsletter, curated by the World Bank’s Jobs Group and Labor and Skills Global Solutions Group. Click here to sign up for the Knowledge4Jobs newsletter.
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