Boosting Productivity in Sub-Saharan Africa: Policies and Institutions to Promote Efficiency

The rising concentration of extreme poverty in Sub-Saharan Africa over the past quarter century can be attributed to the fact that economic growth has been slow, productivity levels are still low, and growth has not been inclusive enough to put a big dent in poverty. What explains the dismal performance on labor productivity in Sub- Saharan Africa compared with the rest of the developing world? This report argues that first, physical capital is scarce and economic activities in the region have low capital intensity relative to other regions. Second, although human capital levels were relatively similar in Sub-Saharan Africa relative to a group of East Asian Pacific countries in 1960, insufficient investment and poor outcomes led not only to relatively lower levels but also to low quality of human capital. Finally, scarce resources, compounded by the inefficiencies in their allocation across productive units (with different levels of productivity), translated into low aggregate labor productivity. Sub-Saharan Africa needs policies to boost productivity across allsectors of economic activity, especially in those sectors in which most poor people make their living. The region needs policies that improve productivity in the agriculture sector, foster rural development, and create jobs for youth who are joining the labor force.