Dismal Growth Performance: The Negligible Contribution of TFP Growth

n ee D e D : b oostin G the C ontribution of t ot AL fA C tor Pro D u C tivity 29

driving these differences. Out of 37 countries in the region, the undercapitalization narrative (that is, factor accumulation explaining more than 50 percent of the labor productivity differences) holds for 3 countries (with a median share due to factor accumulation of 59 percent). On the other hand, the inefficiency narrative (that is, TFP differences explaining more than 50 percent of the labor productivity differences) holds for the remaining 34 countries in the region. For these 34 countries, about 75 percent of the output-per-worker differences are attributed to differences in the efficiency with which workers combine the factors of production.

Third, TFP differences have played a larger role in explaining the gap in relative output per worker across Sub-Saharan African countries over time. The share attributed to TFP has increased for all 37 countries in the region between 1980–89 and 2010–17 (figure 2.4). The median share due to TFP increased from 44 percent in 1980–89 to 76 percent in 2010–17. This finding implies that the narrative of “inefficient use of current technologies”—attributed partly to resource misallocation—is getting more mileage when explaining output-per-worker differences in Sub-Saharan Africa.

Sub-Saharan Africa has failed to catch up with both the aspirational development and global efficiency benchmarks—the EAP5 and the United States, respectively—over the past six decades. From 1960 to 2017, Sub-Saharan Africa registered the lowest annual average growth per worker of any region in the world (figure 2.5): its average annual rate of growth per worker over the 57-year period was 1 percent—smaller than that of either industrial (high-income) countries (2.1 percent) or the EAP5 countries (3.5 percent).10

Main Source of Productivity Growth: Factor Accumulation

Overall Trends

Growth per worker in Sub-Saharan Africa has been overwhelmingly driven by physical capital accumulation from 1960 to 2017. Almost three-quarters of the region’s labor productivity growth from 1960 to 2017 is explained by growth of physical capital per worker. The contribution of TFP, on the other hand, is negligible. The narrative on the economic performance of Sub-Saharan Africa is one of growth at the extensive margin rather than at the intensive margin—a typical feature of low- and lower-middle-income economies. Growth per worker and the role played by factor accumulation (relative to TFP growth) in the region is comparable to that of Latin America and the Caribbean.

Labor productivity growth in the EAP5 countries was more than triple that of Sub-Saharan Africa (average annual growth rates of 3.5 percent and 1.0 percent, respectively) over the 1960–2017 period. The contribution of TFP growth has also been far more significant: more than 20 percent of the growth per worker in the EAP5 countries was driven by greater efficiency in combining the factors of production. Growth per worker in India (3.3 percent per year) is comparable to that of the EAP5, and the contribution of TFP growth is significantly higher (about 50 percent).

Intraregional Trends Resource-rich versus non-resource-rich coun-

tries. Within Sub-Saharan Africa from 1960 to 2017, non-resource-rich countries outperformed resource-rich countries in terms of growth per worker (with annual average rates of 1.2 percent and 0.7 percent per year, respectively). The engines that supported the growth records of these country groups were also different. Capital accumulation was the main engine of growth for both resource-rich