Mr. Dhaneshwar Ghura and Mr. Michael T. Hadjimichael
Aggregate economic performance in sub-Saharan Africa during the past decade has remained unsatisfactory, in contrast to robust performance of developing countries elsewhere. Both domestic and external factors have contributed to this disappointing overall performance. The external environment, characterized by sharp declines in world commodity prices and substantial losses in the terms of trade, has been generally unfavorable. For many countries, the effects of these adverse external developments have been compounded by unfavorable weather. Also, virtually all countries in the region have been confronted with deep-rooted developmental constraints—rapid population growth, low human capital development, and inadequate infrastructure—which have constituted major impediments to private sector development and the supply response of the economies in general. In addition, ethnic conflicts, political instability, adverse security conditions, and protracted civil wars have aggravated the economic performance of several countries. Furthermore, governance concerns have been compounded by the legacy of repressive regimes in several African countries, as well as by bloated and inefficient public administrations, ineffective judicial systems, and complex administrative and institutional frameworks. Finally, the inappropriate economic policies pursued by several countries have also contributed to the weak aggregate economic performance.
This paper examines the growth experience of nine South Pacific countries during the period 1971–93, using the analytical framework of the Solow-Swan neoclassical growth model, panel data, and Chamberlain’s П-matrix estimator. The speed of convergence of South Pacific countries to their respective steady-state levels of per capita GDP, after controlling for the important regional effects of net international migration, is estimated at a relatively fast 4 percent per year. In addition, private and official transfers emanating from regional donor countries have kept the dispersion of real per capita national disposable income constant over the period, despite a significant widening in the regional dispersion of real per capita GDP. [JEL F22, O47, O56]