The curse of dependency: Examining structural change in African economies

Ernest Alang  Wung; Joslanie Douanla  Tameko; Muhamadu Awal Kindzeka  Wirajing

doi:10.59400/fefs2269

Ernest Alang Wung Department of Economic Policy Analysis, Dschang School of Economics and Management, Faculty of Economics and Management, University of Dschang, Dschang 96, Cameroon; Effective Basic Services (eBASE) Africa, Bamenda 5175, Cameroon; Research Center for African Development (ReCAD), Dschang 96, Cameroon
Joslanie Douanla Tameko Department of Mathematical Economics, Faculty of Economics and Management, University of Dschang, Dschang 96, Cameroon
Muhamadu Awal Kindzeka Wirajing Research Center for African Development (ReCAD), Dschang 96, Cameroon; Department of Economic Policy Analysis, Dschang School of Economics and Management, Faculty of Economics and Management, University of Dschang, Dschang 96, Cameroon

Article ID: 2269

Keywords: structural transformation; agricultural productivity; service productivity; employment; external dependency; PLS-SEM; Africa

Abstract

This study investigates the effect of external dependency on structural change in 54 African countries between 1990 and 2021. The Two-Step System Generalized Method of Moments strategy is adopted to control for potential endogeneity problems. Findings reveal that structural change in Africa is strongly impaired by the level of external dependency. This is since all proxies of external dependency are negatively and statistically significant with all structural change proxies. For instance, under agricultural productivity, external debts stocks (EDS) give an eigen value (β) of 0.879, standard coefficient (SC) = 0.162, and p = 0.000; for external debt services (DSED), β = 0.240, SC = −0.040, and p = 0.972; and for personal remittances received (PRR), we have β = 0.764, SC = −0.133, and p = 0.031. Depicting that, the more African countries rely on the external world for change, the less they realize this change. The results remain consistent after accounting for income differences by segmenting African countries into low- and middle-income groups. As suggestions to policymakers, for structural change to concretely take place in Africa, the rate of external dependence should be limited, and resources in Africa and local methods of growth should be used rather than copying from the Western world. Though the results are valid across income groups and Africa, the case of countries could be more significant.

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