Description:
October 1999 - Continued efforts to develop high-level industrial skills in Sub-Saharan African countries may be wasteful without a more competitive environment in the industrial sector. But lack of such skills may limit the benefits to the industrial sector from future liberalization. As a result, the supply response to improved incentives may be weak. Total factor productivity has been low in most of Sub-Saharan Africa. It is often said that the binding constraint on African industrial development is the inadequate supply of technologically capable workers. And many cross-country studies imply that the low level of human capital in Africa is an important source of low growth in per capita income. The results of Pack and Paxson's study do not necessarily conflict with this view. They indicate that in noncompetitive industrial sectors with little inflow of new technology, the contribution of technological abilities, however it is measured, is limited. If liberalization of the economy generated greater competition, or if export growth were accelerated - permitting the import of inputs embodying new technology - local skills could contribute significantly more in raising output. The experience of other countries also suggests that as the economy opens to flows of international knowledge - whether through technology transfers or through informal transfers from purchasers of exports - the technological capacity of local industry becomes important. The policy implications of this analysis are clear: Without the prospect of a more competitive environment, continued efforts to develop high-level industrial skills may be wasteful. But the absence of such skills may limit the benefits to the industrial sector from future liberalization, as a result of which the supply response to improved incentives may be weak. This paper - a product of Public Economics, Development Research Group - is part of a larger effort in the group to analyze the effect of public policies on industrial productivity. The authors may be contacted at packhwharton.upenn.edu or cpaxson@wws.princeton.edu