The authors would like to thank the Associate Editor, Zhihong Yu, and two anonymous referees for their helpful comments and suggestions. The authors would also like to acknowledge useful feedback provided by seminar participants at the Department of Economics and International Business at Sam Houston State University.
Article first published online: 24 MAR 2014
© 2014 John Wiley & Sons Ltd
The World Economy
Volume 38, Issue 5, pages 856–877, May 2015
How to Cite
Wamboye, E. and Tochkov, K. (2015), External Debt, Labour Productivity Growth and Convergence: Evidence from Sub-Saharan Africa. World Economy, 38: 856–877. doi: 10.1111/twec.12166
- Issue published online: 11 MAY 2015
- Article first published online: 24 MAR 2014
Sub-Saharan Africa (SSA) has long suffered from lagging productivity and excessive levels of indebtedness. Using both parametric and non-parametric techniques, this paper examines the impact of external debt on labour productivity growth and convergence across SSA economies over the period 1970–2010. The results indicate the presence of debt-overhang effects, regardless of model and sample specification. Debt reduction through the Heavily Indebted Poor Countries and Multilateral Debt Relief initiatives enhanced growth but was not successful in offsetting the debt-overhang effects. Moreover, excessive levels of external debt were responsible for divergence in output per worker over the early 1990s. Although this trend was reversed over the 2000s, reduction in debt through the debt relief initiatives seems to have been insufficient in helping heavily indebted countries in SSA catch up with the labour productivity levels of the best-performing economies in the region.