Private Sector Development and Economic Diversification: Evidence from West African States

  • Akpan H. Ekpo
  • Udoma J. Afangideh
  • Elijah A. Udoh
Chapter
Part of the Advances in African Economic, Social and Political Development book series (AAESPD)

Abstract

The likely gains from economic diversification in developing countries have been well discussed in the literature. The general consensus is that a diverse economy, based on a wide range of profitable sectors instead of one or a few, is key to building sustainable development and providing new opportunities for growth, employment and development. In fact, it is accepted that economic diversity and sustainable development are linked. Economic diversification is an integral part of economic development and also a consequence of economic development. In addition, economic volatility of a nation can be reduced with increased real sector performance through economic diversification, thereby improving economic stability and job creation. Most West African countries are mono-cultural and dependent on commodity exports with all its attendant vulnerabilities. Despite efforts towards achieving a more diversified economy, countries in the sub-region have been hampered by a sea of challenges, prominent among which include limited market access, insecurity and political instability, rent seeking behavior, inadequate technological capabilities, etc. This paper seeks to investigate empirically the link between private sector development and economic diversification. Panel Data analysis was employed with data drawn from West African countries over the period 2007–2011. The findings from this study showed that economic diversification depends on the level of private sector development, quality of infrastructure and other non-economic factors such as quality of governance and political stability.

Keywords

Diversification Private sector Development Infrastructure Panel analysis West Africa 

References

  1. Acemoglu D, Zilibotti F (1997) Was prometheus unbound by chance? Risk, diversification, and growth. J Polit Econ 105(4):709–751, http://www.jstor.org/stable/10.1086/262091
  2. Auty RM (1988) State enterprise and resource based industry in oil exporting countries. Resour Policy 14(4):275–287, http://www.sciencedirect.com/science/article/pii/030142078890036
  3. Auty RM (1993) Sustaining development in the mineral economies: the resource curse thesis. Routledge, LondonCrossRefGoogle Scholar
  4. Berthelémy J, Söderling L (2001) The role of capital accumulation, adjustment and structural change for economic take-off: empirical evidence from African growth episodes. World Dev 29(2):323–343CrossRefGoogle Scholar
  5. Barthélemy J (2005) Commerce international et diversification économique. Revue d’Economie Politique 115(5):591–611Google Scholar
  6. Economic Commission for Africa (2004) Trade liberalization under the Doha development agenda: options and consequences for Africa. ATPC work in progress paper series, African Trade Policy Centre, Economic Commission for Africa, Addis Ababa, EthiopiaGoogle Scholar
  7. Gelb A (2011) Economic diversification in resource rich countries. In: Arezki R, Gylfason T, Sy A (eds) Beyond the curse: policies to harness the power of natural resources. International Monetary Fund, Washington, DCGoogle Scholar
  8. Gerschenkron A (1962) Economic backwardness in historical perspective, a book of essays. Belknap Press of Harvard University Press, Cambridge, MAGoogle Scholar
  9. Gutierrez de Pineres SA, Ferrantino M (1997) Export diversification and structural dynamics in the growth process: the case of Chile. J Dev Econ 52:375–391CrossRefGoogle Scholar
  10. Hammouda HB, Karingi S, Njuguna A, Jallab MS (2006) Diversification: towards a new paradigm for Africa’s development. ATPC work in progress no. 35. Economic Commission for AfricaGoogle Scholar
  11. Hirschman AO (1958) The strategy of economic development. Yale University Press, New Haven, CTGoogle Scholar
  12. Humphreys M, Sachs J, Stiglitz J (2007) Escaping the resource curse. Columbia University Press, New YorkGoogle Scholar
  13. Imbs J, Wacziarg R (2003) Stages of Diversification. Am Econ Rev 93(1):63–86, http://www.jstor.org/stable/31321629
  14. Kuznets S (1966) Modern economic growth: rate, structure and spread. Yale University Press, New HavenGoogle Scholar
  15. Lewis WA (1954) Economic development with unlimited supplies of labor. Manches School Econ Soc Stud 22:139–191CrossRefGoogle Scholar
  16. McLaughlin G (1930) Industrial diversification in American cities. Q J Econ 44:131–149CrossRefGoogle Scholar
  17. Rostow WW (1960) The stages of economic growth: a non-communist manifesto. Cambridge University Press, CambridgeGoogle Scholar
  18. Samen S (2010) A primer of export diversification: key concept, theoretical underpinnings and empirical evidence. Growth and Crisis Unit, World Bank Institute, Washington, DCGoogle Scholar
  19. Scherer FM (1980) Industrial market structure and economic performance, 2nd edn. Hougton Mifflin Company, BostonGoogle Scholar
  20. Smith SM, Gibson CS (1988) Industrial diversification in nonmetropolitan counties and its effect on economic stability. West J Agric Econ 13:193201Google Scholar
  21. Stanley D, Bunnag S (2001) A new look at the benefits of diversification: lessons from Central America. Appl Econ 33:1369–1383CrossRefGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2014

Authors and Affiliations

  • Akpan H. Ekpo
    • 1
  • Udoma J. Afangideh
    • 2
  • Elijah A. Udoh
    • 3
  1. 1.West African Institute for Financial and Economic Management (WAIFEM), c/o CBN Learning CentreSatellite TownNigeria
  2. 2.Macroeconomic Management DepartmentWest African Institute for Financial and Economic Management (WAIFEM), c/o CBN Learning CentreSatellite TownNigeria
  3. 3.Business Development UnitWest African Institute for Financial and Economic Management (WAIFEM), c/o CBN Learning CentreSatellite TownNigeria

Personalised recommendations