Structural Transformation and Poverty in the WAEMU

Abstract

Poverty is a major concern for West African Economic and Monetary Union (WAEMU) countries. If poverty is decreasing in the WAEMU, it’s level remains high when compared to other developing countries. The low productivity of the agricultural sector, which represents the main activity of the poor in this area, explains the high level of the poverty. A structural transformation that would shift resources from low productivity sectors (notably agriculture) to high productivity sectors (manufacturing and services) would be conducive to poverty reduction. Indeed, evidence from both developed and emerging countries shows that structural change is associated with poverty reduction. In this context, this study analyses the relationship between structural transformation and poverty in the seven (7) WAEMU countries over the period 1996-2019. A simultaneous equation model was used to assess this relationship. The results show that structural transformation does not contribute to poverty reduction in the WEAMU. However, its effect becomes favourable when combined structural transformation with human capital development. In order to fight poverty, the study recommends that the structural transformation process must be accompanied by an improvement in human capital.