Toward an Understanding of Economic Growth in Africa: A Re-Interpretation of the Lewis Model / Xinshen Diao, Margaret McMillan.

Format:

Book

Author/Creator:

Diao, Xinshen.

Contributor:

National Bureau of Economic Research.

McMillan, Margaret Stokes.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21018.

NBER working paper series no. w21018

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Toward an Understanding of Economic Growth in Africa

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Africa's recent economic growth is at a historical high. The patterns associated with this growth appear to be quite different from the Asian experiences where rapid growth was fueled by labor intensive, export-oriented manufacturing. Because this pattern differs with our typical view of structural transformation, a heated debate has begun over the sustainability of Africa's growth. One thing is clear: the recent growth is not well understood. Against this background, we adapt Lewis's (1954) dual-economy model to the economies of Africa to better understand the role that the "in-between" sector as defined by Lewis (1979) has played in Africa's recent growth. Our framework incorporates the coexistence of a closed and an open modern economy and takes into account the diversity and heterogeneity of the activities that characterize modern African economies. We apply this framework to the economy of Rwanda to assess Rwanda's future growth prospects based on different levels of foreign capital inflows. We find that higher foreign inflows lead to significantly more growth in the closed modern economy and stagnant growth in the open modern economy, a phenomenon consistent with recently observed patterns of growth across several African countries.

Notes:

Print version record

March 2015.