cape verde and mozambique as development successes in sub-saharan africa

Cape Verde and Mozambique as Cape Verde and Mozambique as Development Successes in Development Successes in

Sub-Saharan AfricaSub-Saharan Africa

Jorge Braga de Macedo & Luís Brites PereiraJorge Braga de Macedo & Luís Brites Pereira

NBER Conference on African Development Successes Cambridge, Massachusetts, December 11-12, 2009

2

OutlineOutline

MotivationMotivationAn Interpretative An Interpretative

Framework: Framework: How How Globalization & Globalization & Governance interact with Governance interact with ConvergenceConvergence

Empirical Analysis: Empirical Analysis: Diversification-Diversification-Convergence: Assessing Convergence: Assessing Success in SSASuccess in SSA

ConclusionsConclusions

3

1- Sub-Saharan Africa and the Crisis1- Sub-Saharan Africa and the Crisis

Notwithstanding SSA’s improved economic situation over the last ten years, absolute poverty was still widespread when unprecedented energy and food price volatility brought worldwide expansion to a halt.

Growth enhancing policies need to be assessed against progress on MDGs – through improved multilateral surveillance (IMF and G20).

African Peer Review Mechanism and sub regional cooperation also key.

4

MDGs, Constituencies for Reform and MDGs, Constituencies for Reform and Development Ideologies in SSADevelopment Ideologies in SSA

Reaching the MDGs in 2015 presupposes sustained pro-poor economic growth in addition to better governance and more aid.

There have not been enough constituencies for reform in SSA.

ECOWAS and SADC have been less active in their sub-region than AfDB, ECA, IMF or World Bank.

Alternatives to both the “one size fit all” and “each case is unique” development ideologies are urgently needed.

5

International cooperation beyond OECDInternational cooperation beyond OECD

The EU attests to the advantages of regional integration among like-minded countries – especially in the wake of the Lisbon treaty.

Given the slow motion of the EU, regional cooperation may neither produce knowledge of effective policies or institutions nor create conditions for their implementation.

Moreover, outside of the OECD, mutual knowledge (produced from within a cooperative framework) is more limited and the data harder to compare.

7

Mutual Knowledge among Community of Mutual Knowledge among Community of Portuguese-speaking Countries (CPLP)Portuguese-speaking Countries (CPLP)

Ten years after creating CPLP in Lisbon, the 2006 summit approved in Bissau a declaration on MDGs emphasizing mutual knowledge: could standards of appropriateness regarding institutional reform be more responsive to historical affinities than to geography?

8

EU, PALOP, CPLP cooperationEU, PALOP, CPLP cooperationThe five Portuguese-speaking African countries (CPV, MOZ, Angola, Guinea-Bissau, Sao Tome e Principe) formed a group known as PALOP in 1979. PALOP held ten summits until 1992, when the first Regional Indicative Programme with the EU was signed . A Memorandum of Understanding with the European Commission was signed on the eve of the 2007 Europe-Africa summit in Lisbon, extended to CPLP.

9

Why Cape Verde & Mozambique?Why Cape Verde & Mozambique?

Geography - Cape Verde is a small island state with little natural

resources and a difficult climate.

History - Mozambique fought a protracted civil war following its independence from Portugal in the mid 1970s.

Widespread recognition that both countries are actively seeking to overcome adverse developmental conditions due to:

11

Cape Verde and ECOWAS Cape Verde and ECOWAS - YCAP 1990GK$- YCAP 1990GK$

12

Mozambique and SADCMozambique and SADC– YCAP 1990 GK$– YCAP 1990 GK$

15

PALOP vs SSA – YCAP 1990 GK K$PALOP vs SSA – YCAP 1990 GK K$

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

PALOP

SSA

16

ECOWAS, SADC, PALOP, SSA comparisons ECOWAS, SADC, PALOP, SSA comparisons

Macroeconomic Policy and Financial Reputation, building on Macedo et al (2009b) for PALOP (slides from Lopes, 2009);

MDGs and Governance Indicators, based on Macedo et al. (2007b) (slides from World Bank Enterprise Surveys).

Foreign Trade and Economic Growth, dealing with ygap and neq5 interaction in ECOWAS and SADC (own slides and Cabral, 2009 for SSA);

24

World Bank Enterprise Surveys World Bank Enterprise Surveys

Cape Verde has more developed financial markets, greater macroeconomic stability, lower corruption and a state where rule of law is more grounded but less export-oriented firms, less technology licensed to foreigners, higher taxes and a heavier regulatory framework.

Mozambique has better infrastructures (water, electricity, internet) and lower corruption but less developed financial markets, a state where rule of law is less grounded, less export-oriented firms and less technology licensed to foreigners.

30

2 - An Interpretative Framework2 - An Interpretative Framework A nation’s resource endowments and its productivity determine

its economic well-being and how fast it can grow. Through trade, capital flows or migration, globalization can

influence the level of endowments available in an economy, or even, through international technology transfers, its productivity.

A country’s endowments may also determine how much it trades with the rest of the world in terms if goods, services and assets, taking advantage of Globalization.

Moreover, a country with good Governance may likely increase its endowment and well-endowed countries may afford investing more resources to build well-functioning institutions.

Bonaglia, Macedo, Bussolo (2009) describe G&G interaction.

31

How G&G interact with convergenceHow G&G interact with convergence Waves of globalization in16th, 19th and 20th-21st

centuries interacted with different forms of governance responses: G&G interaction is context-specific, as defined by space (geography) and time (history).

The two-way interaction between democracy and globalization found over the entire 1870-2000 period turns out to be sensitive to regional context and convergence.

Macedo et al. (2007a) add the gap in per capita income relative to the frontier to Bonaglia et al. (2009) G&G interaction and test a three-way interaction model on the Eichengreen and Leblang (2006) data for 1970-2004 measuring democracy by the political and economic freedom it allows citizens.

32

Globalization, Freedoms and Convergence: Globalization, Freedoms and Convergence: a summary of three way interactionsa summary of three way interactions

Legend: Strong link Weaker link

Convergence

Globalization Freedoms

(PRCL)

Source: Macedo, Oliveira-Martins, Pereira (2007a)

How do we assess success?How do we assess success?

Study the bi-directional relationship between Study the bi-directional relationship between diversification and convergence, given the diversification and convergence, given the insights of our interpretative framework;insights of our interpretative framework;

1) Seek to identify policy and institutional 1) Seek to identify policy and institutional determinants of successful export diversification-determinants of successful export diversification-economic convergence combinations for economic convergence combinations for ECOWAS and SADC, and ECOWAS and SADC, and

2) Seek to assess to what extent these apply to 2) Seek to assess to what extent these apply to Cape Verde and Mozambique; Cape Verde and Mozambique;

3 - Empirical Analysis3 - Empirical Analysis

Model:Model: Meaningful characterization of each Meaningful characterization of each country’s diversification-convergence, which is country’s diversification-convergence, which is affected by policy and institutional variables, given affected by policy and institutional variables, given control variables;control variables;

Economic convergence:Economic convergence: use Income gap, given by use Income gap, given by ygapygapitit = 1 – ( = 1 – (ypcypcitit / ypc / ypcUSA,tUSA,t), so that gap narrows as ), so that gap narrows as ypcypcitit increases. increases.

Export diversification:Export diversification: use the number equivalent use the number equivalent index (index (neq5itneq5it), which is calculated as the inverse of ), which is calculated as the inverse of the Herfindahl Index (5-digits, SITC rev.2);the Herfindahl Index (5-digits, SITC rev.2);

ECOWAS: Relation between Income ECOWAS: Relation between Income Gap & Number EquivalentGap & Number Equivalent

36

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Lowess smoothing, bandwidth = 0.8

INCOME GAP TO FRONTIER vs. NUMBER EQUIVALENT MEASUREECOWAS

37

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38

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MOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZ ZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWE

NAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAM

MDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDG

ZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAFZAF

.7.8

.91

ygap m

ean

0 5 10 15 20neq5 mean


INCOME GAP vs NUMBER EQUIVALENT - COUNTRY MEANSSADC

ECOWAS, Cape Verde: Income Gap & ECOWAS, Cape Verde: Income Gap & Government Deficit – Country MeansGovernment Deficit – Country Means

40

GNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPV


TGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGO

SENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSEN


NERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNER





GHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHAGHA

NGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGANGA

GMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMB

LBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBRLBR

.92

.94

.96

.98

ygap m

ean

-20 -15 -10 -5 0 5govdef mean


INCOME GAP vs GOVERNMENT DEFICIT - COUNTRY MEANSECOWAS

ECOWAS Income Gap & Government ECOWAS Income Gap & Government Deficit – Time MeansDeficit – Time Means

C P VB E NG M BG H AG N BG INC IVL B RML IN E RN G AS E NS L ET G OB F AC P VB E NG M BG H AG N BG INC IVL B RML IN E RN G AS E NS L ET G OB F A

C P VB E NG M BG H AG N BG INC IVL B RML IN E RN G AS E NS L ET G OB F A




























.93

.94

.95

.96

.97

ygap m

ean

-10 -8 -6 -4 -2govdef mean


INCOME GAP vs GOVERNMENT DEFICIT - TIME MEANSECOWAS

SADC, Mozambique: Income Gap & SADC, Mozambique: Income Gap & Government Deficit – Country MeansGovernment Deficit – Country Means

42


MWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWI

MOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZ

TZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZA

ZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMB MDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWE

ZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZAR



BWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWABWA

MUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUSMUS

.7.8

.91

ygap m

ean

-25 -20 -15 -10 -5 0govdef mean


INCOME GAP vs GOVERNMENT DEFICIT - COUNTRY MEANSSADC

SADC: Income Gap & Government Deficit SADC: Income Gap & Government Deficit – Time Means– Time Means

Z A FA G OB W AZ A RL S OM D GM W IM U SM O ZZ W EN A MS W ZT Z AZ M B








































.88

.89

.9.9

1.9

2

ygap m

ean

-15 -10 -5 0govdef mean


INCOME GAP vs GOVERNMENT DEFICIT - TIME MEANSSADC

ECOWAS, Cape Verde: FreedomsECOWAS, Cape Verde: Freedoms

44


TGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGOTGONERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNERNER


GNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNBGNB





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SENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENSENCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVCPVGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMBGMB

3.5

44.5

55.5

ef

mean

2 2.5 3 3.5 4 4.5prcl mean


ECONOMIC vs POLITICAL FREEDOM - COUNTRY MEANSECOWAS

SADC, Mozambique: Freedoms SADC, Mozambique: Freedoms

45

AGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGOAGO

ZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZARZAR

TZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZATZA

MOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMOZMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWIMWI


ZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWEZWE ZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMBZMB


MDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDGMDG


NAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAMNAM

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23

45

6ef

mean

1 2 3 4 5 6prcl mean


ECONOMIC vs POLITICAL FREEDOM - COUNTRY MEANSSADC

Modelling Strategy

A system equation approach is better suited to model interdependence between variables.

To address the problem of endogeneity due to simultaneity bias we use Three-Stage Least Squares (3SLS).

We also estimate the diversification-convergence relation using alternative techniques (OLS, 2SLS) and obtain broadly consistent results (appendix 2).

ModelModel

(1) ygapit = α1.neq5it + δ1.(Policyit)+ β1.(Institutionsit) +γ1.Z1it + ε1.it

(2) neq5it = α2. ygapit + δ2.(Policyit)+ β2.(Institutionsit) + γ2.Z2it + ε2.it

Sample:Sample: Panel data Panel data t = 1960-2004t = 1960-2004 and and i = 1,…, Ni = 1,…, N

countries;countries; Explanatory Explanatory variables:variables: policy ( policy (inflation, government inflation, government deficit and degree of opennessdeficit and degree of openness) and institutional () and institutional (political political and economic freedom, age of constitution, age of and economic freedom, age of constitution, age of democracy, number of prior transitions to dictatorshipdemocracy, number of prior transitions to dictatorship). ). {{ZiZi} is a set of control variables.} is a set of control variables.

ECOWAS vs SADC ECOWAS vs SADC –– High Regime High RegimeECOWAS SADC

ygap ↓ → neq5 ↑neq5 ↑ → ygap ↓

ygap ↓ → neq5 ↑neq5 ↑ → ygap ↓

open ↑ → ygap ↓

govdef ↑ → neq5 ↓ open ↑ → neq5 ↓

govdef ↑ → neq5 ↑

prcl ↑ → neq5 ↑ ef ↑ → neq5 ↑

prcl ↑ → ygap ↓ ef ↑ → ygap ↓

prcl ↑ → neq5 ↓ ef ↑ → neq5 ↓

legaleng → ygap ↓

ECOWAS, Cape Verde: Income Gap & ECOWAS, Cape Verde: Income Gap & Gvt. Deficit – Regimes, Country MeansGvt. Deficit – Regimes, Country Means

58

.9.9

2.9

4.9

6.9

8

ygap

-20 -10 0 10govdef

LOW FULL

HIGH

INCOME GAP vs GOVERNMENT DEFICIT - COUNTRY MEANSECOWAS

ECOWAS, Cape Verde: Income Gap & ECOWAS, Cape Verde: Income Gap & Inflation – Regimes, Country MeansInflation – Regimes, Country Means

59

.9.9

2.9

4.9

6.9

8

ygap

0 10 20 30 40 50inflation1

LOW FULLHIGH

INCOME GAP vs INFLATION - COUNTRY MEANSECOWAS

ECOWAS: Income Gap & Openness – ECOWAS: Income Gap & Openness – Regimes, Country MeansRegimes, Country Means

60

.9.9

2.9

4.9

6.9

8

ygap

20 40 60 80 100 120open1

LOW FULL

HIGH

INCOME GAP vs OPENNESS - COUNTRY MEANSECOWAS

ECOWAS Economic vs Political Freedom ECOWAS Economic vs Political Freedom across Regimesacross Regimes

44.5

55.5

6

ef

2 4 6prcl

LOW FULL

HIGH


ECONOMIC vs POLITICAL FREEDOMECOWAS

SADC Economic vs Political Freedom SADC Economic vs Political Freedom across regimesacross regimes

34

56

7

ef

2 3 4 5 6prcl

LOW FULLHIGH

ECONOMIC vs POLITICAL FREEDOMSADC

Freedoms: 2SLS ResultsFreedoms: 2SLS Results

63

ECOWAS SADC

ygap neq5 ygap neq5

Between Effects

EFPRCL

EF

Fixed Effects

EF EFPRCL

EF EF

Cape Verde, Mozambique ResultsCape Verde, Mozambique Results

64

ygap neq5

Cape Verde -0.299***(-3.267)

0.438**(2.346)

Senegal -0.370***(-6.040)

0.504**(4.982)

Mauritius -0.833***(-5.429)

Mozambique -0.728***(-4.403)

-1.313***(-4.507)

Full sample: t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1

65

Cape Verde vs ECOWAS: Income GapCape Verde vs ECOWAS: Income Gap.9

2.9

4.9

6.9

8

1960 1970 1980 1990 2000year

ECOWAS CPV

INCOME GAP TO FRONTIERCAPE VERDE vs. ECOWAS

66

Cape Verde vs ECOWAS: NEQCape Verde vs ECOWAS: NEQ2

46

810

12

1960 1970 1980 1990 2000year

ECOWAS CPV

NUMBER EQUIVALENTCAPE VERDE vs. ECOWAS

68

Mozambique vs SADC: Income GapMozambique vs SADC: Income Gap.8

8.9

.92

.94

.96

1960 1970 1980 1990 2000year

SADC MOZ

INCOME GAPMOZAMBIQUE vs. SADC

69

Mozambique vs SADC: NEQMozambique vs SADC: NEQ0

510

15

1960 1970 1980 1990 2000year

SADC MOZ

NUMBER EQUIVALENTMOZAMBIQUE vs. SADC

4 - Conclusions ECOWAS HIGH-regime countries are becoming more diversified

whilst those of SADC are becoming less diversified. Opening up to trade is also an important driver of both convergence

and diversification for ECOWAS, especially in the range of 45-75% of GDP, but not for SADC.

In SADC HIGH-regime countries, economic and political freedom drive convergence, suggesting effective institutional arrangements.

The commonalities present in the HIGH-regimes are: 1) the expected 2-way relationship; 2) convergence entails macroeconomic stability (inflation < 9%,

budget deficits < 7% of GDP); 3) political and economic freedoms are greater; 4) freedoms affect diversification policy as do government deficits,

albeit in different directions across both sub regions.

Conclusions Increasing deficits counteract prevailing diversification stance in

both sub regions, a sign of regime credibility. The comparison across sub regions serves to highlight the

importance of institutions irrespective of the sample chosen: economic freedom always affects diversification in ECOWAS while both freedoms affect it in SADC, where they affect convergence too.

The estimated impact that Cape Verde and Mozambique have on the coefficients for ECOWAS and SADC reinforces the perception from the comparative indicators.

These two case studies of positive G&G interaction reflect on the potential for cooperative governance and peer-review mechanisms outside of its usual domain among OECD and EU member countries, especially in PALOP and SSA .

Thank you for your attention.

73

cape verde and mozambique as development successes in sub-saharan africa

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