Industrialization and Economic Growth in Sub-Saharan Africa: The Role of Human Capital in Structural Transformation

Abstract

The objective of this paper is to analyze the impact of the manufacturing sector on economic growth through the role of human capital. Our data cover Sub-Saharan African (SSA) countries from 1990 to 2015. We use fixed effects, random-effects and Hausman-Taylor estimators. We take into account the unobservable characteristics of countries by including fixed effects or random effects in the model. Our results show that the manufacturing sector through its value added has a positive impact on economic growth in SSA countries. In addition, the interacting models show that the quality of human capital is an accelerator of the role of the manufacturing sector. The coefficient of the catch-up term is negative and significant in all models indicating that countries with a larger productivity gap relative to China are developing faster than countries closer to China. This finding is consistent with the convergence effects usually found in growth model estimates, which are either related to convergences towards a stable state or to a catching-up of growth linked to the international diffusion of knowledge. Contribution/Originality: Unlike previous work, this article brings three major innovations. First, the inclusion of the key role of human capital, then the construction of the productivity indicator by considering China as a reference, and finally the consideration of the endowments of natural resources of countries in sub-Saharan Africa as country-specificity. Verspagen, 2015). In developed economies, the service sector accounts for nearly two-thirds of national production, giving the service industry a large weight in relation to manufacturing. Also, in developing economies, the service sector plays an important role. To this end, it is now argued that service sectors such as software, business processing, finance or tourism act as key sectors in development and that the role of the manufacturing sector is declining. The best example for this perspective is India since the 1990s (Dasgupta and Singh, 2005). Other authors argue that it is not manufacturing as a whole, but manufacturing sub-sectors such as information and

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