Globalization, Labour productiviy and convergence in Africa

Abstract

The topic of convergence has caught the attention of many researchers. For a long time, the economic literature on convergence asserted that less developed countries (regions) should grow faster to catch up with wealthy countries. Globalization and technology transfer appears to be among the drivers of convergence. However, for some decades, empirical researches point out that countries diverge and there is a club convergence phenomenon. The latter finding stresses that within the same group, countries converge while groups diverge. This raises the question of the conditions of convergence. This essay investigates the role of globalization in economic convergence. We assume that the degree of openness will contribute to labour productivity growth and, therefore, will promote convergence. We rely on the case of Africa. This choice comes from the claim that different regions may have their production frontier. We extend the Kumar & Russel (2002), Henderson & Russel (2005), and Badunenko, Henderson & Houssa (2014) approaches by integrating the globalization intensity in the analysis of convergence. This essay stands on a panel of 41 countries over 19 years (2001 to 2019). We use the DEA production frontier methodology to assess the technical efficiency and compute the Malmquist Index of Productivity (MPI) which allows decomposing labour productivity into its components. Findings reveal that globalization is a source of labour productivity growth in Africa. Hence, skipping globalization from the analysis of convergence overstates the role of physical capital accumulation and understates that of human capital accumulation. Moreover, the results show the polarization in Africa since the distribution of labour productivity is bimodal. Technological progress and human capital accumulation are the sources of divergence and polarization of African economies, and technological catch-up (efficiency change), physical capital accumulation, and globalization intensity change are the drivers of convergence in Africa. This study has the merit of using a “holistic” measure of globalization that encompasses all of its dimensions. Therefore, this study highlights the role of globalization in labour productivity convergence in a developing context. However, this study has some limits including the lack of a depth analysis per sector to grasp how the spillover effects from globalization disseminate across sectors. Second, the period analysis is short (19 years). Extending the analysis to a long period would provide interesting insights.