The augmented Solow growth model, total factor productivity growth and the cross-country income growth disparities in Africa.

Abstract

Cross‐country differences in the rates and patterns of economic growth continue to attract scholarly debate. This study contributes to this debate by examining the role and the relative contribution of Factor Accumulation and Total Factor Productivity Growth in explaining growth disparities in Africa. By utilizing panel data for the study period 2002-2012, the study benchmarks the Augmented Solow growth framework for analysis and employs the system generalised method of moments and dynamic ordinary least squares estimation techniques. The main findings of the study can be summarized as follows (i) both Factor Accumulation and Total Factor Productivity Growth are key determinants of output growth in Africa (ii) Factor Accumulation plays a more important role than Total Factor Productivity Growth in explaining growth disparities in Africa (iii) Total Factor Productivity Growth provides a more prudent component than Factor Accumulation in explaining growth disparities within the country clusters (iv) Factors such as domestic credit, inflation and human capital are the most important determinants of Total Factor Productivity Growth in Africa; while factors such as openness, domestic credit, ICT and population growth are the most important determinants of Total Factor Productivity Growth in Sub-Saharan Africa. To spur more growth in Africa, governments need to design policies that enhance capital formation and support human capital development, create incentives for credit expansion to the private sector and put in place stronger policies that control inflation. To foster growth in Sub-Saharan Africa, governments need to create incentives for enhanced physical and human capital accumulation, increase investments in ICT infrastructure, implement outward-looking development strategies, expand credit to the private sector and put in place population growth control measures. The study contributes to literature by paying more attention to Africa in demonstrating both the role and the relative importance of Factor Accumulation and Total Factor Productivity Growth in explaining sources of cross-country growth disparities. Key words: Augmented Solow growth model, Total Factor Productivity, Growth Disparities, Africa.